[House Hearing, 110 Congress] [From the U.S. Government Publishing Office] SHORT SEA SHIPPING OPPORTUNITIES IN THE UNITED STATES ======================================================================= (110-11) HEARING BEFORE THE SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION OF THE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION __________ FEBRUARY 15, 2007 __________ Printed for the use of the Committee on Transportation and Infrastructure ____ U.S. GOVERNMENT PRINTING OFFICE 34-782 WASHINGTON : 2008 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001 COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE JAMES L. OBERSTAR, Minnesota, Chairman NICK J. RAHALL, II, West Virginia JOHN L. MICA, Florida PETER A. DeFAZIO, Oregon DON YOUNG, Alaska JERRY F. COSTELLO, Illinois THOMAS E. PETRI, Wisconsin ELEANOR HOLMES NORTON, District of HOWARD COBLE, North Carolina Columbia JOHN J. DUNCAN, Jr., Tennessee JERROLD NADLER, New York WAYNE T. GILCHREST, Maryland CORRINE BROWN, Florida VERNON J. EHLERS, Michigan BOB FILNER, California STEVEN C. LaTOURETTE, Ohio EDDIE BERNICE JOHNSON, Texas RICHARD H. BAKER, Louisiana GENE TAYLOR, Mississippi FRANK A. LoBIONDO, New Jersey JUANITA MILLENDER-McDONALD, JERRY MORAN, Kansas California GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland ROBIN HAYES, North Carolina ELLEN O. TAUSCHER, California HENRY E. BROWN, Jr., South LEONARD L. BOSWELL, Iowa Carolina TIM HOLDEN, Pennsylvania TIMOTHY V. JOHNSON, Illinois BRIAN BAIRD, Washington TODD RUSSELL PLATTS, Pennsylvania RICK LARSEN, Washington SAM GRAVES, Missouri MICHAEL E. CAPUANO, Massachusetts BILL SHUSTER, Pennsylvania JULIA CARSON, Indiana JOHN BOOZMAN, Arkansas TIMOTHY H. BISHOP, New York SHELLEY MOORE CAPITO, West MICHAEL H. MICHAUD, Maine Virginia BRIAN HIGGINS, New York JIM GERLACH, Pennsylvania RUSS CARNAHAN, Missouri MARIO DIAZ-BALART, Florida JOHN T. SALAZAR, Colorado CHARLES W. DENT, Pennsylvania GRACE F. NAPOLITANO, California TED POE, Texas DANIEL LIPINSKI, Illinois DAVID G. REICHERT, Washington DORIS O. MATSUI, California CONNIE MACK, Florida NICK LAMPSON, Texas JOHN R. `RANDY' KUHL, Jr., New ZACHARY T. SPACE, Ohio York MAZIE K. HIRONO, Hawaii LYNN A WESTMORELAND, Georgia BRUCE L. BRALEY, Iowa CHARLES W. BOUSTANY, Jr., JASON ALTMIRE, Pennsylvania Louisiana TIMOTHY J. WALZ, Minnesota JEAN SCHMIDT, Ohio HEATH SHULER, North Carolina CANDICE S. MILLER, Michigan MICHAEL A. ACURI, New York THELMA D. DRAKE, Virginia HARRY E. MITCHELL, Arizona MARY FALLIN, Oklahoma CHRISTOPHER P. CARNEY, Pennsylvania VERN BUCHANAN, Florida JOHN J. HALL, New York STEVE KAGEN, Wisconsin STEVE COHEN, Tennessee JERRY McNERNEY, California (ii) ? SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION ELIJAH E. CUMMINGS, Maryland, Chairman GENE TAYLOR, Mississippi STEVEN C. LaTOURETTE, Ohio RICK LARSEN, Washington DON YOUNG, Alaska CORRINE BROWN, Florida HOWARD COBLE, North Carolina JUANITA MILLENDER-McDONALD, WAYNE T. GILCHREST, Maryland California FRANK A. LoBIONDO, New Jersey BRIAN HIGGINS, New York TED POE, Texas BRIAN BAIRD, Washington JOHN L. MICA, Florida TIMOTHY H. BISHOP, New York (Ex Officio) JAMES L. OBERSTAR, Minnesota (Ex Officio) (iii) CONTENTS Page Summary of Subject Matter........................................ vi TESTIMONY Barker, James R., Chairman, Interlake Steamship Company, New England Fast Ferry Company..................................... 22 Connaughton, Hon. Sean T., Administrator, Maritime Administration, U.S. Department of Transportation.............. 3 Flott, Stephen P., Chairman, Seabridge, Inc..................... 22 Johnson, Hon. Collister, Jr., Administrator, St. Lawrence Seaway Development Corporation........................................ 3 Margaronis, Anastassis, President, Santa Maria Shipping, LLC.... 22 Ward, Gregg M., Vice President, Detroit-Windsor Truck Ferry..... 22 Yonge, Mark, Managing Memeber Maritime Transport and Logistics Advisors, LLC.................................................. 22 PREPARED STATEMENTS SUBMITTED BY WITNESSES Barker, James R................................................. 44 Connaughton, Hon. Sean T........................................ 59 Flott, Stephen P................................................ 69 Johnson, Hon. Collister, Jr..................................... 96 Margaronis, Anastassis.......................................... 100 Ward, Gregg M................................................... 105 Yonge, Mark..................................................... 145 SUBMISSIONS FOR THE RECORD LaTourette, Hon. Stephen C., a Representative in Congress from the State of Ohio, Allen Walker, President, Shipbuilders Council of America, letter, February 14, 2007.................. 163 ADDITIONS TO THE RECORD Center for the Commercial Deployment of Transportation Technologies, Feasibility Assessment of Short Sea Shipping to Service the Pacific Coast...................................... 166 Horizon Lines, Inc., written statement........................... 173 Richard J. Silva, Westar Transport, Selma, CA, written statement. 183 [GRAPHIC] [TIFF OMITTED] T4782.001 [GRAPHIC] [TIFF OMITTED] T4782.002 [GRAPHIC] [TIFF OMITTED] T4782.003 [GRAPHIC] [TIFF OMITTED] T4782.004 [GRAPHIC] [TIFF OMITTED] T4782.005 SHORT SEA SHIPPING SYSTEM ---------- Thursday, February 15, 2007 House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, Washington, DC. The Subcommittee met, pursuant to call, at 10:00 p.m., in room 2167, Rayburn House Office Building, the Honorable Elijah E. Cummings [Chairman of the Subcommittee] presiding. Mr. Cummings. Good morning and thank you all for being with us. Mr. LaTourette I am sure is on his way, and so we will hear his opening statement when he gets here. When I assumed the Chairmanship of the Subcommittee on the Coast Guard and Maritime Transportation, I promised that our Subcommittee would balance oversight of the Coast Guard with our responsibility to strengthen our maritime industry. Today we begin to make good on that promise by conducting this hearing on short sea shipping, in an ongoing effort to realize the full potential of waterborne transportation to become a reliable and widely accepted transportation mode, particularly for the movement of freight. At the present time, the most highly developed water freight transportation systems in the United States operate on the Mississippi River, the Great Lakes and the St. Lawrence Seaway and often carry agricultural products and other raw materials. However, the Maritime Administration has found that these routes are carrying only about 13 percent of total freight tonnage in the United States. By comparison, nearly 70 percent of the freight tonnage transported in the United States is moved by trucks traveling across our Nation's roadways, emitting pollution and adding to traffic congestion, particularly in metropolitan areas. At the present time, our Nation's transportation policy tends to be individualized for each mode, whether for highways, transit, aviation or railroads, and almost all the other transportation modes receive more attention than does maritime transportation. Maritime transportation, one of the oldest forms of transportation in the world, has become something of a stepchild and one whose welfare is rarely discussed. In fact, the Congressional Research Service reports that expenditures on two of the major programs for supporting U.S. shipping, the Cargo Preference Program and the Maritime Security Program, combined with MARAD's own operating budget and its expenditures on United States Merchant Marine Academy, and the State maritime academies are likely to total about $446 million in fiscal year 2007. This is a drop in the ocean compared to the nearly $39 billion in Federal highway aid the United States Government is expected to provide to our States. While highway travel is obviously our most common form of travel, even it is underfunded. I believe that we urgently need to develop national transportation strategies that are multi-modal in scope and that focus on the unique challenges concerning the movement of freight. The potential of short sea shipping to be a productive mode in our transportation network has not been realized. In large measure, this is because adequate studies have not yet been conducted to assess the nature of short sea shipping's potential, understand the obstacles that may keep us from realizing that potential and identify strategies to overcome these obstacles. Only once these questions are answered can we begin to develop a Federal policy regarding short sea shipping that responds to these issues that sets a vision for what short sea shipping can become and that supports the realization of that division. I know the development of such a policy is a top concern of those in the United States maritime industry, including both the Maritime Administration and the St. Lawrence Seaway Development Corporation, port authorities, shipping lines and even shippers. However, it should also be a top concern of every driver who has ever been stuck in traffic behind a semi- truck at rush hour. It is my hope that today's hearing will be the first step of a concerted and coordinated effort to more closely incorporate maritime transportation and short sea shipping in particular into our national transportation system. Now it gives me great pleasure to recognize our Ranking Member, Mr. LaTourette. Mr. LaTourette. Thank you, Mr. Chairman. Thank you for holding this important hearing today. Short sea shipping could potentially transfer thousands of cargo containers off of our interstates and onto U.S.-flag vessels. An increase in the amount of freight traffic that is moved by coastwise trade would benefit the U.S. fleet, our merchant mariners, our ports and our Nation's shipbuilders. However, short sea shipping will not be widely accepted until coastal transportation services become more dependable, timely and cost effective. The Department of Transportation has identified short sea shipping as a high priority and the Department's plans to enhance freight mobility in the United States. In 2005, the Government Accountability Office studied the concept of short sea shipping and made several recommendations on actions that should be taken before any national short sea shipping plan is developed. I am looking forward to hearing from our first panel, the Federal witness panel, about how they have addressed those recommendations and whether Government assistance is necessary to enhance short sea shipping options nationwide. I am also looking forward to hearing from our second panel on ways that the private sector can promote acceptance and expansion of short sea shipping options. Ultimately, the success of any coastal transportation proposal will rest on the commercial viability of the project. Lastly, I am particularly interested in hearing about the options of using short sea shipping to transport bulk goods and cargoes between ports in the Great Lakes. Each of the major ports along the Great Lakes and the St. Lawrence Seaway already have the capability and capacity to absorb increased vessel traffic. I hope to hear from our witnesses about how the cargo handling capacity of our Great Lakes ports could be tapped as part of a national program. Again, I thank you, Mr. Chairman, and yield back my time. Mr. Cummings. Thank you very much, Mr. LaTourette. Mr. Larsen. Mr. Larsen. Thank you, Mr. Chairman, and I appreciate your holding this hearing today on short sea shipping. In the last week and a half, I have spoken with a number of ports, shippers and labor as well in Washington State about short sea shipping. A major theme from all my conversations has been, is short sea shipping cost effective? At least for the Pacific Northwest right now, the answer appears to be, beyond what is taking place currently, it does not seem to be cost effective. But I certainly agree with MARAD's short sea shipping vision. But I want to find out and hopefully explore how we can match that vision with the reality on the water. I look forward to hearing the testimony of today's witnesses, and hope they can address these issues of cost effectiveness, these issues that I have been hearing from State shippers, ports and labor in Washington State. With that, I yield back and thanks again for the hearing today, Mr. Chairman. Mr. Cummings. Thank you very much, Mr. Larsen. We will now hear from Mr. Sean Connaughton, Administrator of the Maritime Administration, and Mr. Collister Johnson, Administrator of the St. Lawrence Seaway Development Corporation. Good morning, gentlemen, and thank you very much for being with us. TESTIMONY OF THE HONORABLE SEAN T. CONNAUGHTON, ADMINISTRATOR, MARITIME ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION; THE HONORABLE COLLISTER JOHNSON, JR., ADMINISTRATOR, ST. LAWRENCE SEAWAY DEVELOPMENT CORPORATION Mr. Connaughton. Good morning, Mr. Chairman, Mr. LaTourette and Mr. Larsen. Thank you very much for having me here today, and Mr. Johnson. As you mentioned, sir, I am Sean Connaughton, I am the Administrator of the Maritime Administration. I do have a prepared testimony, Mr. Chairman, and would like to submit that for the record and just briefly summarize that for you. Mr. Cummings. Without objection, so ordered. Mr. Connaughton. Thank you, sir. As you mentioned during your statement, actually the waterways of the United States were our original interstates. In fact, in the days before railroads and the actual interstates themselves, the waterways were the primary way to move around the United States, to move cargo and move people. As we developed the railroads, as we developed the interstate highway system, waterways became less and less in use, even though they still are a vital part of our transportation network. We still see large amounts of cargo moving on our inland waterways as well as the Great Lakes and in different parts of the United States, along the coast as well. But we are facing different problems and challenges in our transportation system today, particularly obviously on the shoreside system. The first is obviously most of our major metropolitan areas are facing increasing congestion. What is interesting is that most of these metropolitan areas are also along the coast and also are large ports. We are seeing a great growth in trade. In fact, we are projecting that trade moving though these ports is going to increase by almost 100 percent in the next 15 years, so we are going to see even more stress on our system. We are facing enormous environmental issues, particularly clean air issues, in almost all these metropolitan areas. And also concern and growing concern about movement of hazardous substances and cargoes. And finally, as you mentioned, we are seeing that the cost of infrastructure, shoreside infrastructure, is getting more and more expensive to build new highways, build new railroads and actually maintain those. Because of all these, the Department of Transportation, the Maritime Administration, the lead, has been focusing on how do we go back to the future, how do we go and start to look at our waterways as an asset. Because really right now they are under- utilized in their ability to move cargo, move people in a very efficient manner. We have been conducting and supporting studies, both in the Department of Transportation as well as participating in studies, the GAO study, the I-95 cooperative studies that have been done, both privately and publicly. We have also been holding various conferences as well to try to get stakeholder input, so we can understand some of the challenges that are being faced by shippers, carriers, the ports, and the various localities and what is slowing or what is providing a hurdle to actually utilizing our waterways more. We have helped form an industry-led cooperative to encourage the use of short-sea shipping, and we have also met with and are working now with our NAFTA partners, both Mexico and Canada, to help address some of the issues on moving trade along our coasts and on the Great Lakes as well, and how do encourage some of this cross-border trade. Finally, we have been focusing very much and trying to get more information about many of the current operators out there, and what they are doing. Because there are quite a few operators who are out there, who are financially sound, who are actually making money in some of these short sea shipping operations. So we are trying to understand what is making them successful and how do we end up building on that experience. Through all this, as Mr. LaTourette, I believe mentioned, one of the problems that we have seen and one of the biggest hurdles we have to get over is how do we make these operations reliable, how do we make them cost-effective and how do we address the issue on time, making sure that the cargo moves in a timely fashion and a reliable fashion. The biggest thing that we have seen is that we need to have shipper buy-in into these types of operations for them to expand. The shippers are the ones who right now are very reluctant to move their cargoes onboard these various operations. And by the way, we are starting to call this not just the short sea shipping, we are starting to really focus and call it marine highways, and America's marine highways, because we believe that is a little bit more descriptive of what we are trying to achieve, that is, trying to take cargo off our roadways and put them on the waterway. But also we think it is a little bit more inclusive of what is the biggest success story currently in short sea shipping, and that is our inland waterways, as well as what is happening in the Great Lakes. But for greater use of the marine highways, again, it is getting shipper buy-in, it is trying to focus on making sure we have facilities that are available. Because right now, port space in our major ports is scarce, and it is very difficult to find capacity in our ports to actually support these operations. We have been told by various shippers and carriers that various financial impediments, such as the harbor maintenance tax in which cargo owners have to potentially pay two or three times every time the cargo is moved onboard in different operations, that ends up being an impediment. There are various operational practices that we have to overcome, that is, how do we get the major carries to start to look at a spoke and hub type of operation in moving cargo into a big port and then dispersing it out to the smaller ports. It is making sure we have the vessels available, because right now there is actually a shortage of the types of vessels that we need to make sure that these operations are efficient and effective. And also, this issue about just sharing information. Because even as we have gotten into it, it has become very evident to us that a lot of people just don't know what is going on out there. That is why we are actually setting up a clearinghouse, a web site, in fact, we are starting to roll that web site today, right after this hearing. In fact, some of the first items on that web site will be identifying the current carriers, identifying the various shippers who are moving cargoes, but also the testimony from this hearing, so that people know what is out there, and hopefully we can connect the shippers and carriers that are out there today. I am just going to say where we are going to be going from here is that we are going to be looking at four different areas. First is focusing more on the shippers, trying to get the shippers to buy in. In fact, next week in St. Petersburg, Florida, we are going to be having a conference on this subject that we are really trying to get as many shippers as possible to get them there, to hopefully get them to buy into moving their cargoes more on the waterways versus on the land. The second is trying to identify the existing operators more and focus on them, because they are obviously successful today. And how do we then build on that success to ensure that whatever operations, whatever support, whatever backing that we may give to them, that they actually have a foundation to move forward from. The next is trying to identify all these structural barriers, the things like the harbor maintenance tax, and some of these other items that we again are hearing from our stakeholders that are concerns of them. We are working within the Administration to identify those impediments so we can come forward with some proposals to you and to Congress to hopefully be able to work on. Finally, we are trying to focus on a few model and pilot programs and projects that we hopefully can build on again that we can show people that if we use the marine highways, we can actually take trucks off the road, and people can then start to see real benefits from this sort of program. So we think this is a great hearing that you focus on this, Mr. Chairman. We think this has some great opportunities for the Nation as America faces greater and greater congestion problems on its roadways. Really one of the only options right now that we have, we look out there and we have unused capacity in our waterways. We think that this is something that is the start of a great dialogue between us and yourselves and something that we think has a great future. Thank you very much, Mr. Chairman. Mr. Cummings. Thank you very much. Administrator Johnson. Mr. Johnson. Thank you very much, Mr. Chairman, Mr. LaTourette, Mr. Larsen, for having us here. I want to endorse the comments of my friend, Sean Connaughton, who has talked about the opportunity for maritime transportation throughout the Country. I would like to focus on the opportunities that we have in the Great Lakes and the Seaway, particularly, because I think it is a unique situation. It truly can be taken advantage of in the short term. Historically, the Seaway has been a pathway for bulk commodities. But since the Seaway serves the industrial and agricultural heartland of North America, and because it only operates at 60 percent of capacity, which is a statement that I think few other modes can make, we really do think that this could be an opportunity for reducing congestion and strengthening the national economy. The attributes of the Great Lakes, I think, are somewhat unique. It has ports with the space and with the desire for this type of service. It has established U.S. and Canadian companies and well financed entrepreneurs who are making sizeable investments in proposed new short sea shipping service. An additional reason for our interest, obviously, as I mentioned before, is the Department's focus on mitigation of congestion. We think the Seaway and the Great Lakes could be a major contributor to this cause. As a result of the enormous volume of Canada-U.S. trade, which is the largest in the world, there is really enormous congestion on the land border crossing points, as I am sure people in that region know. If you have ever seen the Ambassador Bridge in Detroit at rush hour, it will truly make your head hurt. For this reason, one would really expect to find numerous marine ferry services between the U.S. and Canada carrying trailers and containers and all kinds of other cargo. Sadly, that is not the case. In fact, in the entire Great Lakes region is only one active short sea shipping truck ferry service, the Detroit-Windsor Truck Ferry, a niche carrier carrying hazmat and oversize project cargo. We are very grateful that Mr. Greg Ward, who is going to be on the second panel today, is here, because he and his father had to drive 16 hours from Detroit to get here for this hearing because of weather conditions. The reason why there is no more short sea shipping in the Great Lakes is really quite simple. It is not rocket science. It has to do with public policy. And the harbor maintenance tax is really a prime example of why we have public policies that almost force cargo onto the roads and away from water. The HMT is vitally important to supporting the commercial navigation infrastructure of this Country and my agency is funded by it, so we support it. But nevertheless, in the Great Lakes, certainly as well as other places, HMT does not apply to cargo imported into this Country over land. As a result, U.S. shippers moving goods into this Country who have a choice will invariably move cargo in truck over land rather than ship over water, even if doing so means having to incorporate hours of delay at the border and with their logistics schedule. I would like to mention the bipartisan legislative proposal introduced earlier this week by Representative Tubbs Jones and Representative English, H.R. 981, which directly address this issue. The Great Lakes Short Sea Shipping Enhancement Act would provide a limited exemption to the HMT for non-bulk commercial cargo moving by water in the Great Lakes. It would remove the disincentive to use the marine highway, thus encouraging the development of these new shipping services in the region. The intriguing aspect of H.R. 981 is that since there is no appreciable short sea shipping on the Great Lakes involving non-bulk commodities, the HMT produces virtually no revenue for the U.S. Treasury from this source. Consequently, it appears that if HMT was removed away from the Great Lakes and short sea shipping as proposed in H.R. 981, there would be no appreciable loss of revenue to the U.S. Government. So we have a rare animal here which is bipartisan and appears to be revenue neutral. And we are hopeful that you will consider that favorably. Another public policy issue that adversely affects the development of short sea shipping on the Great Lakes is the 24 hour rule that is imposed by the Customs and Border Patrol. In the case of a truck trailer, a shipper must provide CBP with advance notice of only one hour prior to arriving at the border. For shipments moving by rail, the notice requirement is two hours. As previously noted, for a similar shipment moving into the U.S. via water where there is no driver on board, the CBP requires at least 24 hours advance notice. So while advance notice is absolutely needed to protect our Country, we need to work with Customs on programs that can be more friendly to the water mode, while at the same time protecting our Country. So again, Mr. Chairman, thank you for having this hearing. We are pleased to be here to offer our views and would be happy to answer any questions you have. Mr. Cummings. Thank you very much. First of all, let me say this. We are trying to figure out how to find solutions to problems. I think I have said that to both of you in private. And what we are looking for is practical solutions. We don't want to be having hearings just to be having hearing and meeting to have meetings and 30 years later or 10 years later another group of people is sitting up here going through the same motions. As I have often said, life is short, there is no dress rehearsal and this is the life. So we are trying to figure out, how do we address this problem. When you look at, Mr. Connaughton, when I read your testimony and you laid out the savings on our roads, when you talked about the fact that you take a tractor trailer and one tractor trailer, the impact on our roads just the surface was significant, then you talked about rush hours and all kinds of pollution, I said to myself, this seems to make a lot of sense. I am wondering, I know we have the harbor maintenance tax problem. I want you all to talk about that for just a moment. Page 8 of your testimony, Mr. Connaughton, you talked about the SCOOP study. Are you familiar? Tell me a little bit about that, because you say there that the harbor maintenance tax, this study, the SCOOP study found that domestic container HMT movements only yielded the Treasury $1.7 million to $1.9 million per year. And that study was dated October 2005. I am just wondering, help me with this, if it is yielding that kind of money, it seems like a little bit of money. And if the cost, if this is a major impediment to having short sea shipping, I don't understand the issue. What is the problem? Do you follow the question? Mr. Connaughton. Yes, I do, Mr. Chairman, and I appreciate the question. It is obviously not a large amount of money, and it is something that we now have numbers to verify what people have been telling us. When we look at where we are in the process right now, this has been going on for I am going to say three or so, three or four years that this Administration has been looking at the whole issue on utilizing the waterways more. It went from being some anecdotal information to now actually having studies, including a GAO study, these other studies, including studies done by our own Office of the Secretary in Transportation. So we now have numbers, and we now have a list of potential impediments to the expansion of the use of the waterways that we can now put together in a proposal and bring it to you all. I think that is where we are right now. We are working internally to put together a package that will go through the clearance process within the Administration. But it will include many of the items that we are talking about here. But it has taken us some time to essentially get these studies done. I think one of the things that we have to do internally as well as externally is explain to people how important this is. Because it has been difficult to get people to start to focus on the use of the waterways more. But right now, when you do look at the congestion problems that we are facing, particularly on the eastern seaboard and on the western seaboards, this is one of the few options we have to greatly expand capacity at a not very large cost. Mr. Cummings. Yes, I got that. But let me tell you where I am going, because I want you to go specifically to my question. If you tell me that shippers are reluctant to do short sea shipping because of a harbor maintenance tax and you tell me that the harbor maintenance tax, up here we deal with billions. And you tell me that the harbor maintenance tax is yielding $1.7 to $1.9 million, I am trying to figure out what am I missing? It is on page 8 of your testimony, first paragraph, last three sentences. Mr. Connaughton. Yes. Mr. Cummings. Mr. Johnson, if you want to chime in, you are certainly welcome. Mr. Johnson. I am waiting to do so, I would be happy to. Mr. Cummings. I could see you, I thought you were trying to jump out of your seat. Mr. Connaughton. I can tell you, Mr. Chairman, we understand, we are now, now that we have some numbers, we are starting to vett a proposal to come forward on this issue, but also to address some of the other hurdles and impediments that we see that are potentially out there. Because this really is one of several issues that do, once you take care of this one issue, there are still other issues that have to be addressed to encourage greater utilization of the waterways. Mr. Cummings. Mr. Johnson? Mr. Johnson. Yes, Mr. Chairman. I think in terms of the Great Lakes, I understand Sean's position with respect to the whole Country, but with respect to the Great Lakes, it is actually simpler, I believe. If a limited waiver of the harbor maintenance tax for the Great Lakes is passed, there will be results in months, not in years. We have stakeholders who are putting together their business plans and are ready to go to implement short sea shipping. But when you get to the issue of the HMT tax, it destroys the economics. If $1.9 million or $1.7 million or whatever is a little amount of money, in the Great Lakes it is zero, or virtually zero, because there is no short sea shipping . So there would be no loss of revenue to the Treasury. Mr. Cummings. So you are saying the barrier is so high, in other words, you said there is no short sea shipping? Mr. Johnson. Virtually none. Mr. Cummings. OK. Mr. Johnson. Virtually none. And the reason is because in my view, because the HMT destroys the economics for the Great Lakes carriers. But if that barrier is removed, and if indeed it is the case there is no loss of revenue to the U.S. Treasury, it seems to me that that has a lot going for it in terms of amending our public policies to improve short sea shipping, at least in the Great Lakes. Mr. Cummings. I am just going to ask you another question, because I want other Committee Members to have an opportunity, let me ask you this. What would you like to see, what would you all like to see us do to try to resolve the problem? I know you mentioned the Tubbs Jones bill, got that one. What other things would you like to see us do? Mr. Connaughton, I was glad to hear you comment about the web site that is going up, right after this hearing? Mr. Connaughton. Yes, Mr. Chairman. Mr. Cummings. So I should be able to go back to my office as soon as I leave here and-------- Mr. Connaughton. They told me 10:00 o'clock, so I will send them an e-mail to make sure. [Laughter.] Mr. Cummings. Can we take credit for that? We in Congress, we like to take credit for things. Mr. Connaughton. Mr. Chairman, you are my oversight Chairman, if you want to take credit for it, take as much credit as you would like, sir. But we did time it for this hearing, sir. [Laughter.] Mr. Cummings. We appreciate that. Tell us a little bit about the web site and then to my other question. Mr. Connaughton. Yes, Mr. Chairman. What the web site will have on it is actually, it is going to be outlining the work that has been done to this point, it will also have the short sea or marine highway operations hat we have identified in pretty much every port of the United States, and what are the operators and what type of capability they have. We are going to start highlighting specific operators on a monthly basis, as well as shippers and try to commend shipper who commit to utilizing these types of operations. And then also, we are going to make this a general clearinghouse so we can end up in the long term making this not just for the United States but also to expand it to both what is happening in Mexico and Canada as well. Mr. Cummings. And now to my other question, gentlemen, the whole issue of what can we do? What is one of the most practical things that we can do as Member of Congress to help make this happen? Mr. Connaughton. Mr. Chairman, again, this issue is one where there are several facets to it. We are putting together a proposal for you all to consider. Mr. Cummings. When can we expect to have that proposal? Mr. Connaughton. We are in the final stages of putting it together within the Maritime Administration and we will then be forwarding it to the Department of Transportation and get clearance through OMB as well. So it is as long as that process can take. It could be very quick, it could be very lengthy, sir. It is our hope, we are right now essentially done with it and we are going to start sending it through our clearance process. Mr. Cummings. I think I speak for our entire Committee, we would like for that process to move along. We want it to be a thorough process, of course, but we would like to get that as soon as possible. As soon as you can give us a date certain, because I want to be able to hold you to a commitment. Mr. Connaughton. Yes, sir. Mr. Cummings. Because we who have been around here for a little while get commitments and then the next thing you know, we are not here any more. So we want to hold you to that. Get that to us as soon as you can. Mr. Connaughton. We will, Mr. Chairman. Mr. Cummings. Mr. Johnson, to my question, what can we do? Mr. Johnson. Mr. Chairman, I think it is in my testimony. Of course, neither the Department nor the Administration have taken a position yet on H.R. 981. But for our part, on the Seaway, we are going to be advocating inside DOT and inside the Administration that they should look upon this favorably. Hopefully we will succeed. With respect to Customs and Border Patrol, I think it would be helpful as we enter into discussions with them as to how to solve this problem, how to solve their security issue, how to solve the industry issue of advance notice, if the Committee would support the notion that there ought to be consideration of the short sea shipping implications of the 24 hour rule. That would be helpful to us. Mr. Cummings. Mr. LaTourette? Mr. LaTourette. Thank you, Mr. Chairman. First, Mr. Chairman, I would ask unanimous consent that a letter to me dated yesterday from the Shipbuilders Council of America be included in the record. Mr. Cummings. Without objection, so ordered. Mr. LaTourette. Thank you very much. Gentlemen, thank you for coming. Mr. Johnson, I particularly appreciated the point you made about the harbor maintenance tax, because when I was getting ready for this hearing yesterday, with Mr. Rayfield, and we were talking about the harbor maintenance tax, I said, well, how can someone squawk about losing revenue when we don't have any shipping that is paying the revenue currently. Mr. Johnson. When you don't have it to begin with, right. Mr. LaTourette. That's right. And I think that we were just talking during the Chairman's questioning, and I think to the Chairman's question about what can we do, it would be my predisposition, and I will chat with the Chairman a little bit later, to perhaps draft a H.R. 981-like bill. As you know, that only went to Ways and Means, a tax-writing Committee. Perhaps we can draft a piece of legislation that gets a subsequent referral to the Transportation Committee, since it is what we do here. And as well, I know that you know there is a ferry title in the Federal Transportation bill, SAFETEA-LU. That has primarily focused on North Carolina, New York and Alaska. It would be our hope that, and I think the reason my colleague, Stephanie Tubbs Jones, perhaps introduced this piece of legislation, one of the stakeholders that is getting ready to go is the Port of Cleveland. They are aggressively moving forward. That is what I want to chat with both of you about. Because I get the 24 hour rule is an impediment, I get that the harbor maintenance tax is an impediment. But clearly, there must be some other impediments. I understand that harbor maintenance tax makes it commercially unfeasible. Mr. Connaughton, when you and I talked a couple of weeks ago, is there a difficulty with our bilateral relations with the Canadians that makes this, for instance is there a Canadian Jones Act? Is there something that would prevent us from launching tomorrow, if we took your suggestions, passed H.R. 981, got the waiver on the harbor maintenance tax, solved the 24 hour rule, had a lot of educational sessions and the shippers bought in, are there other impediments to this working across the Great Lakes? Mr. Connaughton. Mr. LaTourette, we are currently in discussions with the Canadians over an issue that we were not aware of until there was an attempt by the Canadians to impose their own Jones Act, their own coastal act, to an American ferry operator. The Canadians had amended their law, from what I understand, to require that ferries be essentially Canadian vessels, those going between the United States and Canada. We were not aware of this until this one operator had the Canadian authorities actually come to them and actually try to impose his requirements. We have been having meetings at the Department of Transportation, Department of State, the Maritime Administration, with the Canadians. They are quite clear to that as to what their law says. They have indicated a willingness to amend that law, but that has not happened at this point. So we do see some problems with trying to move forward on some of these operations if at the end of the day it is being mandated that they be Canadian vessels. Mr. LaTourette. I think it is more than a little bit of a problem. As a Member of the Congress, and I think I would be joined by both sides, I don't think we would stand for that, that if we are going to have trans-Lake shipping, we are going to have to accept Canadian vessels and they don't have to accept vessels made in the United States. That is kind of a non-starter to me, and that is a big obstacle. Can you just give me a rough idea of where you are? Do you expect this to be resolved or not resolved by summer, by next year? What do you think is going to happen? Mr. Connaughton. We have had meetings with the Canadians within the last month about this issue. The Department of Transportation and Maritime Administration have been very strong in stating to the Canadians that this law is unacceptable and that we view it as a violation of some of our other treaties and that it violates international law. So we are pursuing this with the Canadians very aggressively. They have indicated a willingness to revisit this with their Parliament. However, at this point, that has not happened. But we just met with them within the last month, sir. Mr. LaTourette. Is there any role that the IGC can play in this? Or do you think NAFTA covers this? Mr. Connaughton. Sir, I am not quite sure. I was made aware of this as this issue started percolating along in the most recent meetings that have occurred. I will have to come back and give you more information. Mr. LaTourette. If you could, when you do have more information, with the Chairman's position, if you could sort of update us, let us know where that issue is. That seems to be a big one. Mr. Cummings. I agree. Mr. LaTourette. Mr. Connaughton, you talked about pilot projects. Can you tell me where the pilot projects are and what they involve? Mr. Connaughton. Right now, actually, sir, going back to TEA-LU, which you referred to, Congress actually did authorize a couple of pilot projects. One of them in particular is the movement of containers from the Port of New York up to Bridgeport, and actually has authorized the spending of money toward those projects. We have also been approached by some other operators where there have been shippers who have come forward and indicated they would be willing to move their cargoes onboard some of these marine highway operations on a regular basis. So we are trying to see how we can facilitate those. We have met with a couple of these operators and the shippers and what we would like to do is essentially put them together as a package to move forward and bring to you. Mr. LaTourette. One of the other difficulties, I think Mr. Johnson is right, that we have excess capacity in some of the Great Lakes ports, but one of the difficulties is the development of the infrastructure. It is OK once you get the boat moving and everything else, but getting it to the port and loading it and then taking it over. For instance, there is a town in my district that wants to do trans-lake shipping to Port Burwell over in Canada. I just read a newspaper article that the Port Burwell people don't want the trucks on their streets and they don't have the infrastructure to receive it. So how do you envision the infrastructure part of this working? Would you envision ramping up the ferry title in TEA- LU? Or additional Federal partnership with private entities? Mr. Connaughton. It would have to be greater partnerships with private entities. We are seeing a greater utilization of where those ferries exist today, we are seeing just an enormous use and bottlenecks. A very good example that ties into both your points and your question, in Bridgeport, Connecticut, which I went up and visited up there. One of the reasons was because of the provisions in TEA-LU on a proposed operation. There they essentially had been authorized, although not appropriated, funds to build a ro/ro facility. What the truckers want to do is be able to put the container and trailer on a vessel or barge, get to the other side, essentially avoid all that bottleneck and then drive it off right onto 95. The problem is, there is no ro/ro facility there in Bridgeport, and that is what they need. Being up there and visiting them there, there is this Bridgeport to Port Jefferson Long Island Ferry across to Long Island Ferry. What was interesting was that they indicated they are seeing an enormous increase in truck traffic on those ferries. In fact, so much so that I think they have actually added additional ferry vessels. It is essentially truckers trying to avoid taking 95, going across and coming back on the Long Island Expressway. So what we would like to do is focus on some of these operations, identify where they may be successful and more importantly, how do we build on both what Congress has already done and also where there is a successful operation, how do we help them expand their operations. Mr. LaTourette. Thank you very much. Thank you, Mr. Chairman. Mr. Cummings. Thank you very much. We are very pleased to be joined this morning by the Chairman of the Full Committee, Chairman Oberstar. Welcome, Mr. Chairman. I yield time to you. Mr. Oberstar. Thank you, Mr. Chairman, and thank you for convening this hearing. Thanks also to Mr. LaTourette. I have wanted since the outset of this session of Congress to get our Committee engaged energetically in the issue of short sea shipping. It is one that been of interest for a long time, but not of interest to the Committee. And we are going to make it a focus of this Committee's actions. The President just recently launched a congestion mitigation initiative. We need to have maritime engaged vigorously as a part of that initiative. There were a number of other shortcomings in that congestion initiative, one was that it didn't even reference the existing congestion mitigation and air quality improvement provisions of current law for the Federal highway program. It didn't enlist the intelligent transportation systems of current law. There are tools available to help with congestion. Short sea shipping is one of those important tools. Today it takes a container longer or as long to cross seven miles in Chicago as it does to go 1,800 miles from the west coast to Chicago. It costs $300 per container to go 1,800 miles in roughly 40 hours, and it takes $300 and 40 hours to go seven miles through Chicago. Then that container has to go another 1,200 miles to the east coast. If we mount a vigorous short sea shipping initiative, those containers that are now coming in at International Falls, Minnesota from the west coast, some 500,000 containers last year, making International Falls a ``seaport'' on the U.S. Canadian border, we could instead of continuing to contribute to the congestion in Chicago move them through the Port of Duluth or the Port of Two Harbors and short circuit that congestion in Chicago that is so desperately choking our transcontinental shipping system. There is going to be more of that congestion as Cosco moves to a 10,000 container vessel fleet. They already have several 9,000 container ships, 7,000 container ships. Maersk launched a 12,000 container vessel that can only probably put in on one port on the east coast. The St. Lawrence Seaway, as the Administrator mentioned just moments ago, is vastly under- utilized and we will soon be considering legislation in the Committee to establish a bi-national seaway authority. Canada and the United States ought to merge their separate authorities, reduce the costs, instead of two charges, one Canadian and one U.S., we can have one charge, one team. We only need one buoy distribution, we need only one aids to navigation system. We don't need two of them. We can harness the resources and the capacity of the St. Lawrence Seaway to be a major contributor and also a financing mechanism as we established for Dulles and National Airports to upgrade the operations of the St. Lawrence Seaway. So that the gentleman's State of Ohio will see increased vessel activity on Lake Erie, and I know Mr. LaTourette is very keen on that, will probably more ships and use more steel. So the hearing today is sort of a down payment on an extended inquiry into the obstacles to an efficient short sea shipping initiative. Mr. Connaughton, I understand the government of Canada requires some U.S.-flag ferries to get an exemption from the Canadian version of our Coastwise Trade Act, they call it the Coasting Trade Act. Even if they are on an international voyage, that is between U.S. and Canada, what is the basis for that, and what are its impediments for cross border traffic? Mr. Connaughton. Thank you, Mr. Chairman. We were made aware of the situation from a small ferry operator, it was actually on a lake, I believe, it was in Montana, when the Canadian authorities attempted to enforce this law on this operator. We have made representations and we have had several meetings with the Canadians, both here in Washington as well as in Ottawa, protesting this and vigorously defending obviously the right of the United States to have American vessels engage in ferry operations with Canada. We have within the last month had a meeting with the Canadians about this. They had indicated a willingness to bring this back to their Parliament to amend the law, to address this. But as far as I am aware, this has not occurred yet. So we are continuing to pressure them to amend this law, because we believe this is a barrier, obviously, to the purpose and the thrust of this hearing, but also it violates obviously agreements and understandings that we have had with the Canadians. So we will continue to vigorously represent our interests to the Canadian government on this issue, sir. Mr. Oberstar. I will be happy to be engaged in that process with the Canadian embassy here and with my colleagues in the Canadian Parliament, the Commons and the Senate. In fact, I just last week had a visit with a Canadian delegation here in the U.S. I wasn't aware at that point, in preparation for today's hearing, of this particular issue. But in preparation for the hearing, we saw this as a concern. So we will join with you vigorously in pursuing. Mr. Connaughton. Mr. Chairman, we would be very happy to come up here and brief you about what the status is of the law whenever it is convenient for Members of the Committee. Mr. Oberstar. We will do that. Mr. Johnson, the harbor maintenance tax on moving from Canada is an impediment. In what ways does that affect the Seaway? Mr. Johnson. Well, the way it affects the Seaway, Mr. Chairman, and by the way, thank you for your comments about the Great Lakes and the Seaway. As the panelist who is most responsible for talking to that issue, your words are music to our ears. The Seaway could be a way of easing congestion across border if we are able to increase our container traffic. As you know, the Seaway is primarily a bulk pathway now. But it could be a way to move containers inland. We are working now with several entrepreneurs who have a business plan put together to do that. But they are only planning now on moving containers from Halifax and Montreal to Canadian ports, not to U.S. ports. And the reason why is because of the HMT. So in my testimony I have talked about the H.R. 981 that has been introduced and how that limited waiver would positive impact the flow of traffic and cargo on the Great Lakes. Mr. Oberstar. Mr. Connaughton, the effect on the harbor maintenance tax would be minimal, wouldn't it? Mr. Connaughton. Mr. Chairman, I actually have some of the estimates, the overall numbers on the harbor maintenance tax. But currently, just on domestic moves, as was referenced by Chairman Cummings, that on containers right now, domestically the HMT is about $1.7 million to $1.9 million a year that is collected. Overall, there are about $60 million a year on all commodities moving domestically in the United States. That is all cargoes for the HMT. And that is a subset of the overall annual collections which was about $880 million a year from all HMT. Mr. Oberstar. All that harbor tax money that is being collected is being deposited in the trust fund and that is being used to improve our harbors and our navigation channels, and it just sitting there making the deficit look smaller. Mr. Chairman, I will have other questions. Mr. Cummings. Thank you very much, Mr. Chairman. Mr. Gilchrest. Mr. Gilchrest. Thank you, Mr. Chairman. I am not sure if you have welcomed the former administrator of the Maritime Administration, but Helen Delich Bentley is in the room. Welcome, Helen, back to Washington. Mr. Oberstar. Will the gentleman yield? May I join in that welcome? Mr. Gilchrest. Certainly. Mr. Oberstar. [Greeting in Serbian.] Mr. Gilchrest. I thank the Chairman for yielding. I think the study and the evaluation that is coming up from many of our interests is in the area of where can short sea shipping be competitive, what are the costs, who should share in that cost, where are the viable options around the Country, where can this type of shipping complement existing modes of transportation. I am hoping that when your evaluation comes through you can have some specific recommendations in the Country and then maybe we can expand the pilot project. I say that because I represent most of the Maryland section of the Chesapeake Bay. And in the Chesapeake Bay, of course, we have two significant rather large harbors, ports, one is down in the Norfolk region and one is the Port of Baltimore. But in our region, we also have to take into consideration Philadelphia and the Port of Wilmington. So the modes of transportation most of them, are 95 and Route 13. But connecting all these ports are things like the C&D Canal, the Wicomico River, there is a good deal of barging that goes up that river to the town of Salisbury. Going up the Nanticoke River, you go over to Seaford, Delaware. You could get from Crisfield, Maryland to St. Mary's County on the western shore in a short ferry ride and you would virtually eliminate a full day's drive for a trucker. So as we are talking about the St. Lawrence Seaway and the Great Lakes and other places, it might sound parochial, but in this region we are looking at Philadelphia and Baltimore and Annapolis and Washington and Richmond and Norfolk and all those places. So to see what is viable and can be interconnected, don't leave us out of that evaluation. Mr. Connaughton. Mr. Gilchrest, I just would point out that actually one of the current operators out there right now that is successful is a company called Columbia Coastal Transport, which actually has essentially as its hub Baltimore. They move cargo containers, particularly from Baltimore to New York and from Baltimore to Norfolk and back and forth. Mr. Gilchrest. And you know that the Port of Baltimore, largely with the help of--I am not going to say the middle name, Mr. Oberstar, because I will probably mispronounce it again--but my dear friend Helen, we have a great ro/ro facility in the port of Baltimore. So if we can get some understanding about eliminating the tax, some type of tax incentive, a joint operation, that was mentioned in some of the brief concerning the Marco Polo program in Europe, and are we looking at that to see how somehow that could be replicated here in the United States. We have NAFTA with North America, that free trade agreement. Can that be replicated in some sense with the idea of this short sea shipping? I just wanted to make another comment if I have enough time. I would look forward to continuing our communication with both of you and actually the second panel. As we go through all this, there is a measure, and I don't want to say this is an obstacle. But when we are looking at Mississippi for short sea shipping, they are likely to close the Mississippi Gulf Outlet, for several reasons, to protect the city of New Orleans, to better replicate what the needs of nature's infrastructure are as rebuilding the wetlands down there naturally, with the silt coming down from the Mississippi and not just moving in infrastructure because it is going to be an economic growth important part of the community. But as we go through all this and we are looking at short sea shipping, taking pollution out of the air, taking trucks off the highway, the facilities I think would be wise to look to make those facilities, that infrastructure, compatible with nature's design in that region, so we don't replace one form of pollution with another. Thank you, Mr. Chairman. Mr. Cummings. Thank you very much, Mr. Gilchrest. Mr. Larsen. Mr. Larsen. Thank you, Mr. Chairman. I want to thank the panel for being with us this morning. I want to apologize on behalf of the people I represent in Washington State, because as Mr. LaTourette mentioned the ferry title of SAFETEA-LU and he mentioned Alaska and New York, New Jersey and North Carolina, I am not doing my job to explain to other Members of this Committee that Washington State has the largest ferry system in the Country. So that is my fault and I apologize for that. I will do a better job of being a good commercial for the Washington State ferry system. On any one day, if you are sitting not too far from my home in Everett, Washington, which you look out into Possession Sound, you can see the kind of traffic that we are using Possession Sound for. If you go to the other side of Whidbey Island on Puget Sound, if you sat on Ebey's Landing you could watch container ships, bulk carriers, log rafts, barges, commercial fishermen, recreational fishermen. We are using our marine highway, as you called it, quite extensively. So as I was talking with some of the folks who represent a variety of interests, ports, shippers, labor, so on, in Washington State and mentioned the concept of short sea shipping, they had sort of heard of it, but they didn't put that name on it. It was just, we are doing what we are doing because we have the water and we use the water. But I was wondering from a Washington State perspective, Pacific Northwest perspective overall, there are some limitations that they discussed about how to expand that. An example that the Port of Everett used, they had considered moving paper rolls from Vancouver Island and barging those down to the Port of Everett, they were looking at it as a potential business. And the numbers didn't work out, for a variety of reasons, including there was no potential for backhaul. But if you look at truckers, truckers are moving things forward, backward, everywhere. There is a way to spread out the costs, at least if you look at the I-5 corridor in the Pacific Northwest, and you compare that to what you can do to expand business on the marine highway. I am wondering if you have looked at, as we talk about east coast and Mississippi and the St. Lawrence, have you compared the Pacific Northwest potential versus the focus of at least some of the literature in the Gulf Coast, Eastern Seaboard, St. Lawrence? Have you compared and contrasted, and what conclusions have you come up with? Mr. Connaughton. Mr. Larsen, actually some of the studies have actually evaluated the viability of some of these operations on the west coast as well. There are the same sorts of hurdles that are being faced out there. One of the biggest problems is again about reliability service. It is about getting the shippers to buy in. It is trying to make sure that there is the opportunity for a balanced commercial operation. But what is interesting is that we are for the first time starting to see much more interest by shippers as well as trucking companies to utilize, to look at these services. Because many of the trucking companies are facing greater problems in their operations and trying to be able to move their cargoes on behalf of cargo owners through some of the major cities. They are also looking at the problems, they can't find drivers. So there is more interest. One of the issues out there is that you are looking at much longer distances, which means that there is a lot more, there are some opportunities there. But on the east coast, there are lots of small businesses, you have some major ports, you can move it very quickly out of there to a smaller port somewhere along the way, where it can then avoid those bottlenecks in the major congested areas. Your area, though, is actually one of the great success stories. That ferry system that operates, that Washington State operates, is an enormous number of trucks that are taken off the road. And then the fact that you see such an incredible number of movements up to Alaska that again, a lot of it is ro/ ro traffic that is actually, I mean, there are some land site connections to Alaska. But for the most part, that operation up there is such that it is kind of a model for the rest of the Country. But we have not forgotten the west coast. We actually have attempted to identify, these are some bulk commodity movers that are moving cargoes. We have actually had also, we know there are some operations down in southern California that are using the waterways to move cargoes between southern California and Mexico, to avoid some of the bottlenecks at the border because it is cheaper. Mr. Larsen. If I may, Mr. Chairman, I just want to put my oar in the water on this issue of the U.S.-Canada ferry issue as well, not only the Washington State ferry system. We have one run between Anacortes and Sidney, B.C., on the south end of Vancouver Island. But there is a private operator, Black Ball Transport, that runs from Port Angeles on to Vancouver Island as well that would, I am sure, be very interested in the end result of any conversation between the U.S. and Canada on this ferry issue. Mr. Connaughton. Yes, sir. Mr. Cummings. Mr. Bishop. Mr. Bishop. Thank you, Mr. Chairman. Thank you very much for holding this hearing. I represent New York One, which is the eastern half of Long Island, about the last 70 miles of Long Island. So my district is bordered by water on three sides, and both the Port Jefferson Ferry and the Cross Sound Ferry are in my district. I was very interested to hear, Mr. Connaughton, your comments about the success thus far. I guess my question would be, could you elaborate more on that specific issue and perhaps make note of what impediments, other than the harbor maintenance tax, exist for this truly short sea shipping? The distance between Connecticut and Long Island is, I think at its widest point, only 20 miles. Yet that represents an avenue for us that would significantly help with congestion on the Long Island Expressway, which is not so affectionately referred to as the world's longest parking lot. So I am just curious as to what additional comments you could make in that area. Mr. Connaughton. Thank you, Mr. Bishop. It was actually an eye-opener for me when I went to Bridgeport and I was provided this information about that ferry. Because I am a good Long Island native, and I hate to say this, but if you wanted to go on a cheap date and take a date out on a cruise, you would drive out to Port Jefferson and buy a ticket and go over and go out on Long Island Sound. When I was there, those are my memories of Port Jefferson-------- Mr. Bishop. That is a cheap date. [Laughter.] Mr. Connaughton. Yes, sir. I was a cadet at the Merchant Marine Academy, so you have to look for cheap dates. But I was very surprised when I was there to see the number of trucks coming off. They indicated that they had seen, I think they number they used to me was almost a 60 percent increase in the number of trucks that are actually on that ferry. So we are gathering some information about that ferry, as well as the Orient Point ferry and the New London ferry as well, to understand what is happening up there. Because as you mentioned, obviously there was a lot of congestion, generally a lot of congestion, but even more congestion with the reconstruction of the Long Island Expressway. I am very interested to see what is happening now that they finally have finished with that construction, has that seen a drop-off in the amount of trucks using those ferries. But I think it is a great example of something that the marketplace actually worked, where truckers saw this as an opportunity to get off the island in a much quicker--obviously they are going to end up paying more. But when you look at reliability and the fact that they can get off the island, off and on the island. I think it is again another great example. One of the things we have been trying to do in the Maritime Administration, as we have gotten into this, is have a much broader look at what opportunities exist out there. Because before I think to a certain extent we were looking at, OK, whole new operations. Maybe there is at least a foundation that we can show some successes in, look at some of these existing operations, see what we can potentially do to help them expand. In fact, one of the things, when I was out there in Bridgeport, was they were indicating that they were expanding the ferry operation. What do we need to do with that, because the ferry facilities are still the same size. Mr. Bishop. You earlier mentioned a report that you were working on. Will there be in that report suggestions for how ferry operations of this type can be expanded? Mr. Connaughton. That is where we would like to go. Mr. Bishop. Let me move to a related but different subject, and that is, there are 40 some liquid natural facilities being proposed in coastal areas throughout the United States, one of which is in the middle of Long Island Sound. I am just curious, all of these facilities will require a security buffer zone, will require floating security zones as the tankers arrive to in effect feed the LNG facility. Has your department made any assessment of the impact that those facilities might have on short sea shipping as an impediment to the development of shipping? Mr. Connaughton. No, sir, we have not. We are involved actually in not the broad water facility that you are mentioning, but we are actually the licensing authority for almost all offshore deepwater LNG facilities. Just because of where that facility is, we are not involved. But when we do look at the facilities that are responsible for in licensing, we do make sure that the siting of the locations of those facilities are such that they do not impede or impact navigation. Mr. Bishop. Thank you very much. Thank you, Mr. Chairman. Mr. Cummings. Thank you very much. Just two questions. Administrator Connaughton, MARAD administers the Title XI loan guarantee program, is that right? Mr. Connaughton. Yes, sir. Mr. Cummings. And they will provide guarantee on ships, mortgages for like 30 years, is that right? Mr. Connaughton. Twenty-five years, I believe. Mr. Cummings. Twenty-five years? Mr. Connaughton. I believe it is, sir, 25. It might be 30. Mr. Cummings. Do you believe the loan program can be helpful in providing security financing for short sea shipping ventures? What do you believe the default rate would be, the risk would be? Mr. Connaughton. Obviously, sir, we evaluate these applications for Title XI on a case by case basis. We actually do an economic analysis to see if the proposed operation is viable. The Administration did not support, has not supported additional funding for Title XI. But when applications come in and if Congress provides the funding for it, we make sure that those funds that are allocated or appropriated by Congress are, that the money is well spent, and that the operations are viable and that we will not hopefully have a default. I want to go back to, one of the opportunities again is if we do focus more on some of these operations that are in existence today and see how we can expand it, at least then you have a foundation to avoid potential defaults or problems than you do with brand new operations. Mr. Cummings. So I take it that the recommendations, I am not asking you to, I know you all still are having things checked over with your various agencies. But the recommendations that you will be giving to us I take it do not have a recommendation for more money, based on what you just said, for Title XI? Is that a fair statement? And did you all consider that? We are here trying to solve a problem, and I am just wondering, you seem to think that if the proper appropriate applications came before you, it is something that certainly would be considered. I am just wondering, then you said, that one of the problems would be the funding. And I am just wondering if you all considered that when you all were putting together your recommendations? Mr. Connaughton. Mr. Chairman, the package we are putting together will, at least at the start, attempt to address what we think--it will be a fairly comprehensive package. As it goes through the process, obviously there is a strong possibility that as we get into a dialogue with other parts of the Government, changes may be made. But essentially we are going to look at this as a clean sheet, as we make our proposals internally, sir. Mr. Cummings. OK, so now going back to my question, so you all did consider it, and right now, it is not, to your knowledge, it won't be a part of what you are presenting to us? Mr. Connaughton. I don't know what the package will look like at the end of the process, sir. But essentially we are putting together a package that looks at each element of the marine highways. Mr. Cummings. Is that package still open? In other words, if you-------- Mr. Connaughton. Yes, sir, we have not started the clearance process. It is essentially, actually it is sitting on my desk, along with some other legislative proposals that we would like to bring forward this year. But we are going to break out this issue, the general issues involved with this and send that forward initially to get it going in the process. Mr. Cummings. I was extremely impressed with how you got that web site going at the beginning of this hearing. That was just wonderful. If there are things sitting on your desk, maybe we need to schedule another hearing and get some of that stuff moving. [Laughter.] Mr. Cummings. It just seems to me something that is practical, that might be a good thing. Did anyone else have any questions? Thank you very much. We really appreciate your being here. Did you have something, Mr. Johnson? Mr. Johnson. I just wanted to say with respect to the Great Lakes, you were talking about funding, the interesting thing that I find is that the entrepreneurs we are dealing with are self-financed. They are not coming to the Government for money, which I think is refreshing. Mr. Cummings. Very. Mr. Johnson. So it is the public policy issues that we need resolved, and commerce will start to flow. Thank you. Mr. Cummings. Thank you very much. Thank you all. Our next group of witnesses, would you come forward, please? Our next panel consists of Mr. Gregg Ward, Vice President of Detroit-Windsor Truck Ferry; Mr. Mark Yonge, President of the Maritime Transport and Logistics Advisors; Mr. James Barker, Chairman of the Interlake Steamship Company; Mr. Stephen Flott, Chairman of Seabridge, Inc.; and Mr. Anastassis Margaronis, President of the Santa Maria Shipping Company. I want to note that Mr. Margaronis will be discussing his effort to construct ships for the short sea trade in the Port of Baltimore, and I welcome him. I also want to take a moment to add my welcome to former Congresswoman and guru of all shipping imports, Helen Delich Bentley. Thank you very much for being with us. Mr. Ward. TESTIMONY OF GREGG M. WARD, VICE PRESIDENT, DETROIT-WINDSOR TRUCK FERRY; MARK YONGE, MANAGING MEMBER, MARITIME TRANSPORT AND LOGISTICS ADVISORS, LLC; JAMES R. BARKER, CHAIRMAN, INTERLAKE STEAMSHIP COMPANY, NEW ENGLAND FAST FERRY COMPANY; STEPHEN P. FLOTT, CHAIRMAN, SEABRIDGE, INC.; ANASTASSIS MARGARONIS, PRESIDENT, SANTA MARIA SHIPPING, LLC Mr. Ward. Thank you very much, Mr. Chairman. When you think of short sea shipping, I hope you will think of it as an extension of the highway. Mr. Johnson mentioned that we had a long drive here. I tried to come in on Tuesday to Washington, but all the flights were canceled out of Detroit. They were going to be canceled on Wednesday for weather, so I decided to jump in the pickup truck and with my Father as my co-pilot, and with my father back there, we started the business together. Mr. Cummings. Where is your father? Mr. Ward. In the corner. Mr. Cummings.Why don't you stand up? You did all that driving? [Laughter.] Mr. Ward. He's too tired. Mr. Cummings. We want to thank you for being with us. We appreciate all the efforts that you went through, and we want you to realize that we consider all this testimony very important. We really do appreciate the fact that you took up the time and went through all of that to get here today. Thank all of you for being here. Mr. Ward. Thank you very much. It was very insightful to come down the interstate, because it was mostly a whiteout, we drove through most of the night. There were times where the interstate was closed and we had to take arterial roads and then get back on the interstate. When I think of short sea shipping, I see it as an important opportunity to add redundancy and resiliency to our transportation system. In fact, I think it should be a national security priority. I am focusing mainly on the Great Lakes, and I will use Detroit-Windsor as a point of reference. We have three bridges or three bridge areas between the U.S. and Canada. In Detroit, we have the Ambassador Bridge, built in 1929, that takes over $300 million worth of cargo a day across it. If that infrastructure failed, there are no alternatives. If you look at the Department of Homeland Security priorities: prevention, protection, response and the last one is recovery, we need a means of recovery at the border. I think the importance of short sea shipping is to provide alternatives to make a more redundant, resilient transportation system. I think it is critical that we look at doing that. Today we mentioned the harbor maintenance tax. It is a very critical issue and I would even say that if the harbor maintenance tax isn't settled, there will be no short sea shipping. A case in point, we have been doing this for over 16 years. We started Earth Day 1990. We had the mission of congestion mitigation. There are rules on hazardous materials at the bridges and tunnel in Detroit. Your legal alternative is 165 miles away. Our small service, which is no more than a parking lot, a means of conveyance, we use a tug barge to another parking lot, we have eliminated tens of millions of miles off the highway system. We think that this is very important to think of, because not only from the environmental perspective, but from the what do you do in an emergency. After 9/11, the automotive companies used our service to keep plants open. In fact, GM said that they were able to keep the Hamtramck assembly plant open in a letter to Customs because of the Detroit-Windsor Truck Ferry. That is 3,400 people. This little service was able to help. We need a more resilient transportation system, and we have this great waterway that exists, and we have the U.S.-Canada trade, our largest trading partner, we have the density of traffic, the density of commerce already moving. So we have the ability to have that market. I don't think it is a question of coming to the Government for money. It is changing the regulatory framework so that we have a system that will run efficiently and effectively. With the harbor maintenance tax, if a truck is coming to Detroit and it comes to the bridge, and there is a great amount of congestion, which happens frequently, they cannot move over to the water route. Because if they did, that truck driver would have to call his dispatch and his dispatch would have to call every single customer with freight in that truck and get their permission to be subject to the harbor maintenance tax. It is $125 per every $100,000 in cargo. It is not going to happen, and it doesn't happen. If you look at our business, the primary freight we bring back from Canada to the United States is empty hazmat tankers, because it has no cargo value, therefore no HMT. So I think is necessary, when we look at building a transportation system, when we look at short sea shipping, it really is a security issue. It is the opportunity to make our system more redundant. When we were coming down the interstate, we saw the Eisenhower symbol for the building of the interstate system, I hope some day that we can look back at this Committee as taking a leadership role in advancing our transportation system and utilizing these existing resources, the waterways, to build a more redundant and reliable transportation system. The challenge is the HMT. There are some other challenges with Canada as far as customs cost recovery. Any new maritime service has to pay for customs. Bridges and tunnel gets customs for free forever. That makes it very non-competitive. Our company, and we are a very small company, had to take the Canadian government to court. We litigated it, and now we don't pay this fee. But at one time, this fee we pay Canada for customs was representing $10 of every truck that crossed. That is going to hurt anybody coming after us, because it was an out of court settlement. and there is no precedence. We also have an issue of ice-breaking fees in the river. We have to cross a one mile river. We pay $3,100 to the Canadian government for ice-breaking fees, and we are not eligible for ice-breaking services. And the majority of the ice-breaking in the Detroit River is done by the U.S. Coast Guard. So the Canadians are charging us $3,100 for services provided by the U.S. Government and paid for by U.S. taxpayers. One last issue is on the hazardous material which we transport. It is supposed to restricted from the local bridge and tunnel. When you come into the tunnels in Baltimore, you will see big signs that show the hazmat restrictions. There are no such restrictions signs in the Detroit area. Here you have the Ambassador Bridge, the most critical piece of infrastructure for the U.S.-Canada trade, and we don't have a consistent, reliable hazardous material enforcement policy. So when you look at short sea shipping, I hope you will look at the security end of it and the ability to add redundancy and resiliency to our transportation system Thank you. Mr. Cummings. Thank you very much. Mr. Yonge. Mr. Yonge. Good morning, Chairman Cummings and distinguished Members of the Subcommittee. In my written testimony I have attempted to provide you with a brief overview of the development of short sea shipping from a commercial operator's point of view. I have provided a number of recommendations that I trust you will find helpful. As a past owner and operator of U.S.-flag vessels, I have a deep passion for the preservation and enhancement of our U.S. merchant marine and our U.S. sea lift capability. Therefore, I wish to thank you for this opportunity to offer my assistance to what I feel is a great opportunity for the U.S. maritime industry to provide needed additional transportation capacity for our Nation's economic future and security. Based on the global proviso that transportation capacity and economic sustainability go hand in hand, and accepting the reality check that the surface transportation capacity in the United States has not kept pace with transportation demand, a freight capacity crunch of unprecedented dimensions is predicted through 2035. Just building more roads or expanding rail capacity to meet projected demand are simply not viable options. Even if they were possible, adding trucking company driver shortages, new hours of service regulations and other trucking perfect storm challenges compounds the problem. Short sea shipping, which is to say, the U.S. maritime industry, has the potential to provide our Nation with almost immediate cost- effective additional surface transportation capacity that will assist in securing our Nation's economic sustainability. While much attention has been paid in recent years to the increasing flood of imports to this Country and to the additional burden it has placed on our transportation system, significant growth is also occurring in domestic freight in greater volumes. It is the transport of goods and domestic service where short sea shipping can make a major contribution to the Nation's transportation system. There are a number of existing operating companies and started companies that have developed plans or are capable of providing short sea shipping services here in the United States. However, there are barriers that need to be addressed, sooner better than later. The domestic harbor maintenance tax, the HMT, places a tax on the movement of goods by water. Freight that could utilize marine alternatives is discouraged from doing so by the HMT, and relies instead on trucks and rail even when faced with congestion. The HMT is presently a major disincentive for shippers and logistics providers to consider short sea shipping as an intermodal marine alternative. Quick action by Congress can produce immediate results. As an example, Chuck Raymond, Chairman of Horizon Lines, a major U.S.-flag vessel operator, has given me permission to advise you that if the domestic harbor tax is removed, his company will seriously pursue dedicating up to four 21-knot 600 plus FEU container ships to the coastwise trade by mid-2007. Chuck estimates about 2,200 trucks per week would be taken off the roads in highly congested areas. That is 114,400 trucks per year. Availability of existing U.S.-flag Jones Act vessels is limited. Additional vessels are needed, including new technology, high speed vessels that can meet supply chain needs and expectations. Financing new vessels and/or new U.S.-flag vessel technology is nearly impossible today without Government credit assistance, such as the MARAD Title XI program. Another possible aid might be the restricted use of the capital construction funds, CCF. There may well be other alternatives, such as those that are being discussed today. But the U.S. has a proven Title XI and CCF program in place now that could be enacted relatively quickly, while other alternatives may take years to enact or put into place. The MARAD Title XI loan guarantee program has been responsible for much of our Country's U.S.-flag fleet development. Without it, two new short sea shipping services could not have been commenced in Hawaii and the Great Lakes. Expanding the use of CCF could also be a means to foster the building of new coastal short sea shipping vessels. I think that the expansion of CCF may be accomplished in a targeted way to answer concerns by some in the maritime community who are fearful of too many vessels being built and thus creating over- capacity in the market. At least it is worth looking at. Horizon Lines, Matson and Tote are all successful participants in Title XI and CCF. Congress would do well to continue to strengthen their support for vessel financing. There are other suggestions that I have included in my written testimony that offer additional options that have been under discussion in recent years. Consider the billions of dollars that are spent on highway infrastructure and hundreds of millions in public funds that are spent on rail, but very little funding is available for building ships for a marine highway, or what we refer to as an intermodal marine transportation system. In my written testimony, I provided a statement that 12 miles of new four-lane highway construction equates to about $100 million. That amount in a Title XI loan guaranty program would generate loan willingness from this financial sector of about $1 billion, or an example, 10 $100 million U.S.-flag Jones Act short sea vessels. Providing assistance to stimulate the initiation of new short sea services or new intermodal marine alternatives will not only add surface transportation capacity but increase our Nation's sea lift capability. Reinforce the vitality and growth of our merchant marine and add fuel to our marine transportation economic engines. I close with the suggestion that time is of the essence to secure our economic sustainability. Consider carefully that even if the critical barrier is resolved today, the HMT, and the difficulty of obtaining long-term vessel financing, it will be two to three years before new ships can be built and launched and put into service. That is another two to three years of population growth and economic growth, creating additional transportation demand. Add the trucking companies' dilemmas and we may well find our Nation caught in the perfect storm warning that a trucking company executive stated to us. Thank you again for your invitation and I look forward to any questions you may have. Mr. Cummings. Thank you very much. Mr. Barker. Mr. Barker. Thank you, Mr. Chairman. Good morning, Members of the Committee. I am Jim Barker, Vice Chairman of Mormac Marine Group, which includes three companies operating ships in the U.S. domestic trades: Interlake Steamships Company on the Great Lakes; Moran Towing in the coastwise, and Harbor Towing Trades and New England's Fast Ferry Company in the coastwise passenger service. I am pleased to appear before this Subcommittee today to speak on the development of short sea shipping in the United States. In particular, I would like to address what seems to be an enigma. If short sea shipping really offers so many benefits for addressing the congestion that increasingly clogs our rail and highway systems, why don't we have it already? The short answer is, of course, we already do. The companies I represent here today are primarily engaged in short sea shipping in one form or another, in some cases for many decades. Thus a second, more vexing question is that if short sea shipping does exist successfully on a commercial basis in some trades or services, such as bulk or passenger ferries, why isn't it developing more rapidly in other areas directly related to reducing highway and rail congestion, such as intermodal freight? Before answering those questions, let me provide some background on our already existing short sea operation. Interlake Steamship is among the three largest vessel operating companies on the Lakes. Our ten vessels include four 1,000 foot long self-unloading bulk carriers. We are proud that Interlake was among the first companies introducing these revolutionary vehicles in the Lakes trade. Today we are one of only three operators of that class ship in the Great Lakes. In addition, we operate four smaller 700 to 800 foot self-unloading bulk vessels, one non-self-unloading bulk vessel and one self-unloading integrated tug barge. Moran Towing Corporation owns and operates a fleet of 84 tugs providing coastwise towing and harbor services in 13 U.S. east and Gulf ports with an additional 11 tugs under construction or on order. In addition, Moran operates an extensive fleet of 8 ocean-going dry bulk barges, 11 inland harbor barges and 7 petroleum product barges, all of which are double hulled, and has 3 additional double hulled articulated tug barges under construction. In addition to these coastwise services, Moran has also supplied towing services for other short sea services. The newest member of our family, New England Fast Ferry, operates two high speed passenger ferries operating three to ten voyages daily between New Bedford, Massachusetts and Martha's Vineyard, depending on the season. During the summer season, six voyages daily between Providence and Newport, Rhode Island, with another vessel. As its web site states, by traveling with us from New York, Connecticut, Boston or Providence, you save over an hour each way and feel fresh sea air, rather than staring at brake lights on the Cape and I-95. Together, these companies provide a broad perspective into the Jones Act industry and short sea shipping in the United States as it exists today, and how it can develop further in the future. As this small plug for New England Fast Ferry suggests, short sea shipping is already contributing to reducing congestion on U.S. highways, or at least helping to ease the impact of continued growth. Nowhere, however, is this more clear than the Great Lakes region. Shipping on the Great Lakes began in 1679, when the first ships to sail the upper Lakes, the Griffon, was launched. By the mid-19th century, the bulk shipping industry had begun on the Great Lakes, with the transport of iron ore, wheat and coal. While the late 19th century may have been the golden age of Great Lakes shipping, when the lines of ships moving up and down the Lakes were similar to the bumper to bumper traffic of today's urban roadways, the cargoes carried by today's fleet far exceed those of earlier times. How this translates into congestion mitigation on our roads and highways can be easily extrapolated from the cargo-carrying capability of just one of our 1,000 foot vessels. In a single voyage, each such vessel transports the equivalent cargo of 700 car unit trains, or 2,800 25 ton trucks. Thus, in the course of a 300 day 50 voyage season, the Interlake fleet of 4 1,000 footers and 6 smaller vessels conservatively carries the cargo equivalent of almost 3,000 100 car unit trains and over 1 million 25 ton trucks. This means less congestion on the already congested road and rail networks in the region, less impact on aging rail and highway infrastructures, less impact on the environment and less impact on the millions of U.S. and Canadian citizens living in the region. To help address the challenge of developing intermodal freight services, we looked at three examples of potential short sea intermodal roll-on/roll-off freight services employing truck ferries: a cross-lake service between Michigan and Wisconsin; an inner harbor network serving the New York metropolitan area that is taking trucks from Perth Amboy to Brooklyn; and a coastwise service from Perth Amboy, or New Jersey, to a point or points in southern New England. The prototype vessel we used in this analysis is a 320 foot roll-on/roll-off single deck truck ferry built on catamaran hulls. We would have a service speed of 19 knots, although the ships could do 27 knots. These ships would be constructed of steel, although they also could be constructed of aluminum. But you would certainly need the steel on Lake Michigan to break ice. It is now commonly accepted that the principal user customers of short sea intermodal freight service will be trucking companies. But what does it take to get trucks off the roads and onto our ships? Let me say that we have looked at this from the trucking companies' viewpoint, we have looked at it from our viewpoint as a shipping company, and we have looked at the public policy implications. And it is really a difficult problem. You have heard about the harbor maintenance tax, and I won't go into that. Let's just look at the commercial operation of how you would do this. We have looked at it on a cost basis: can we beat the cost of a truck, say a truck comes out of Minneapolis and is going to Detroit. Instead of going around to Chicago, can we take him across Lake Michigan, which is a shorter route in mileage, which is good news, and beat the cost. And the answer is, we can. We can under certain circumstances. When you look at all the short sea operations we are in now, when we take a load of iron ore to Indiana harbor from Duluth, we are full. We carry 57,000 tons. Now, you tell me I can be full going across Lake Michigan and I can beat the cost of a trucking company. You tell me that I am half full and I can't. So one of the key ingredients here is working with the trucking companies to get close to a full load. That is hard to do. People have talked about Title XI, and Title XI is a useful tool. To use Title XI as we have on the Great Lakes, we have long-term contracts with iron or steel companies. That guaranteed that the debt will be paid. You have no such guarantee with a trucking company, especially when you are working with five or six trucking companies, and you certainly don't have a guarantee for 10 years, say, to do the underlying financing. And therein lies a huge problem. Mr. Cummings. I will have to ask you to wrap up, Mr. Barker. I have let you go three minutes over so far. Mr. Barker. I am sorry about that. So the answer is, we can meet those costs, but it is a very difficult infrastructure problem of working with the trucking companies to get the long-term commitment. Because they are just not set up to do that, and to solve the problems that will happen as you put the system together. It is the commercial problem that we are trying to solve. Mr. Cummings. Thank you very much. Mr. Flott. Mr. Flott. Thank you, Mr. Chairman, Members of the Committee, Mr. LaTourette. Thank you for inviting me to testify. In the background notes to the hearing and in prior testimony you have heard a lot about the challenges and the reasons why we are here. What I want to do today is show you what we intend to do at SeaBridge, which is making money making short sea services work. Now, because pictures are worth a thousand words, I brought some slides, and I will go through them very quickly. This slide presents essentially an unsustainable future. I think we have all recognized that today. But what is the cause? Where does the source of this come from? The major driver of our infrastructure problem is domestic highway freight. It dwarfs all other movements in this Country. Congestion is not caused, though, by trucks alone. There are an awful lot of cars on I-5, I-10 and I-95 where coastal waters are available. Indeed, there are many more, and a lot of people traveling in those cars going up and down those routes. In my view, in SeaBridge's view, this is a business opportunity. That is how we have approached it. Our competition is the highway, the very highway itself. The challenge just referred to by Mr. Barker is to attract the traffic to that highway. How? Like any business, you have to prepare a compelling value proposition for your customers. You have to save them time, money, make using our marine highway more convenient. Help it become more cost-effective. For truckers, that is taking all the reasons that they use rail intermodal today in the right markets, adding speed and flexibility at a price that compares with using the highway. For motorists, it is offering a more convenient, comfortable transit in less time, and at about the same cost as driving. That is the compelling price-service offering we are going to make. We have taken a well-proven European model, indeed a global model, the use of ro-pax vessels. Last year in the European Union, 450 million people, 100 million cars and 22 million trucks used ferries as part of their transportation. We have spent six years and $4 million of our own money developing tools to make that work. What are the tools? Well, marine highways, at the end of the day, are ports and ships. Both are critical, but ships are key. Size, speed, sea-keeping, the term for how comfortable the ship is as it rides at sea, and fuel efficiency are essential to create the frequency, reliability and comfort that users require. The key words in motor transportation are frequency, reliability, and speed. Simply put, we have developed an extraordinary ship that can produce the right speed for a variety of routes that maximizes our utilization of the vessel and makes the service offering work. We will bring the service to the United States. It is a matter of time. People keep talking about getting shipper buy-in. Shippers today don't ask often how their goods get from where they are picked up to where they are delivered. They use 3PPLs, they use truckers, others to manage that flow. When we build highways, people come. If we produce a better way of getting goods from point A to point B, the truckers will buy into it as they have rail intermodal. You have heard a number of obstacles. The biggest obstacle I see is financing, and it drives everything. There is the highway trust fund, Rail Rehabilitation and Improvement Fund, our air traffic fund. That is probably not the right name. There is nothing comparable, though, for water. We don't have a comparable RRIF for water. It is a good model. But I would urge the Government to consider the use of leverage, just like we do with the Title XI program. Private capital uses leverage to increase the value of its capital and to earn greater returns. It seems to me the Government might take a page out of that book as well in looking at things like Title XI's ability to draw private capital to public uses. It seems to me, Mr. Chairman and Members of the Committee, that short sea shipping is a matter of private initiative backed by public support. Thank you very much for your time. My prepared testimony is in the record. Mr. Cummings. Thank you very much. Mr. Margaronis. Mr. Margaronis. Thank you, Mr. Chairman. My name is Anastassis Margaronis and I am the President of Santa Maria Ship Owning and Trading. As you pointed out, we recently signed a letter of intent to operate the shipbuilding facilities at Sparrows Point. I should point out, Mr. Chairman, that that would not have been possible without the assistance of former Congresswoman Bentley, who was very instrumental in getting us across the street, so to speak. There are a couple of points that I would like to make. First of all, you will all be pleasantly surprised to find out that there are some short sea shipping routes that already are competitive and profitable. Those are the feeder ship routes between major ports to satellite ports. They would include, starting in the Pacific Northwest, Seattle-Tacoma to the Port of Olympia, where there are major distribution centers around Lacey and the Olympia area out there; Oakland to Stockton; L.A.-Long Beach to satellite ports at San Diego and Port Wynimie. On the east coast, Norfolk to Baltimore-Philadelphia; Norfolk down toward Jacksonville. Those would also include New York. We did a study that include the shipbuilding costs based on our projections for what we would be able to build a ship at Sparrows Point and concluded that we would be able to operate, or somebody would be able to operate a vessel service between a major port and a satellite port at a 75 mile distance and reduce the cost it takes to truck that container by 10 to 15 percent, assuming a diesel cost of $2.50 a gallon. That includes paying for the new cost of construction of the ship. The way that that would be guaranteed initially would be either through the ports or through major shippers like a Wal-Mart or a Target. Number two, we need new shipbuilding in the United States. You asked what it is that the Committee could do. The most important thing is to re-fund the Title XI program, put a billion dollars in there and provide us to build $20 billion worth of ships and then all of this can become a reality. Without that program, it is going to be very, very incremental and it is not going to be very successful. We need the economies of scale. The program can do a lot of things. It can create the financing of owners and ship owners to come in to order the ships. It can be used to help shipyard upgrade their facilities. And I would suggest it should be extended to ports to upgrade their terminal operations, because especially the satellite ports would need upgrades in order to make this happen. A Title XI program is ideally suited for this. If you put in the money, we can make it happen. Without that, many of the shipbuilders around the United States don't have the economies of scale to make this a competitive go. They need some assistance. Having said that, we would not need a taxpayer subsidy in any of the routes that I mentioned. They could all be done privately with guarantees either from a shipper or from a port. We are competitive already. If I could say one thing, we have heard a lot about the Jones Act and the problems of American shipbuilding. We can be competitive if we have the right tools. Right now we need those tools. A couple of other things, terminal operations. We do need to look at terminal operations at smaller and satellite ports. We have had some discussion about the Great Lakes. That would be an ideal setting for moving container traffic. As Mrs. Bentley pointed out to me, she said, some of the Members may be too young to remember, but there was a time when we used to have coastal shipping in the United States, before it was run out of business by some of our bigger modal carriers, who shall remain nameless. In any case, the potential is already here. We can do it. We need the tools. We need some financial direction. The ports themselves in some of the cases are big enough to do the job. They could guarantee the long-term charters that we need. We heard something about the problem of the long-term agreements. In the feeder ship area, we can already do that. The long haul will be a little bit more problematic, as some of the speakers have mentioned. The ro/ro is an excellent idea for the long haul. Again, we could be building those ships. And that again really needs some support from something like Title XI. We have had a lot tougher challenges to meet in our past. We have built a national highway system, we have built a national railway system, we have gone to the moon and back. It is time we returned to our maritime roots. It is time we went back to sea. Thank you very much. Mr. Cummings. Thank you very much. Thank you all very much. We are going to ask a few questions and see if we can wrap this up by no later than about 5 after 12:00, 10 after max. So I just have a few questions. Mr. Flott and Mr. Yonge, you both cite development of a high speed 30 to 40 knot vessel for short sea shipping. Are there any high speed vessels that move trucks over these types of routes anywhere in the world? Mr. Flott. Yes, Your Honor--my lawyering background. Mr. Cummings. I understand. I used to practice myself. [Laughter.] Mr. Flott. There are, but it is not a question of the amount of speed, it is the right speed. Often it is the ability to make a schedule reliable, it is the reliability of the schedule. So often the speed of the vessel is really used as a way of making sure that in bad weather or in other circumstances the vessel is able effectively to make its schedule. One of the first things I was told when I started talking to trucking companies about our service and our concept of creating this marine highway as a highway was, well, how are you going to make up time. For them, it is OK to leave late, but you had better arrive on time. So the fact is there are, in many parts of the world, high speed vessels carrying tracks. High speed is of course a relative term. In some parts of the world high speed may be in the upper 20's. In other parts of the world, it may be in the high 30's or 40's. Mr. Cummings. Mr. Barker, you looked like you wanted to say something. I know I didn't address that to you. Mr. Barker. No, I really didn't, except that one of the problems, you see, as you go high speed, you start sucking up fuel in a huge way. The reason we, for example, had this set on about 20 knots is in that one little ferry that would carry, take 45,000 trucks off the road, you would also save 750,000 gallons of gasoline. And that for each ferry would be it. As you start ramping up that speed, you start sucking up a lot of fuel and increase your costs. Mr. Flott. And indeed, that is one of the things about the vessel, that is exactly right. In ships, you have this dramatic curve, this is a physics exercise, essentially you are shoving a solid mass through water. So as you go faster through water, you essentially drive up the amount of energy necessary to push that vessel through the water. That is one of the things we have spent our time solving, because you can't just burn up more fuel. The idea was to find a way of moving freight faster but with more fuel efficiently. Now, the pentamaran hull, the vessel we have designed, essentially is designed to do that. And its performance, as fuel efficiency for dead weight ton at speed, is considerable. Mr. Cummings. Yes, sir. Mr. Yonge. Mr. Yonge. Chairman Cummings, our group has been fortunate that we have worked for a number of different clients. We are a consulting group. So we have done financial modeling for a number of vessels based on a number of different hull designs. Recently, medium speed diesels have come into play. What we have found, what has been mentioned over here, speeds are achievable at very economical to what they would have been by using the type of engines we were thinking about five years ago. And it is all about what is needed. You might need a 30 knot vessel on one run between Jacksonville and New York and you might need an 18 knot vessel that would work just fine between a shorter haul. It is all a matter of shipper's requirements, but mostly what the truck, what intermodal systems are today and we are trying to match those kinds of speeds and transit times. Many times ships can beat it and improve it. Mr. Cummings. You all think, and I guess, Mr. Ward, you might be interested in this question. Do you all think that we have to have the States and metropolitan planning organizations involved in this process, and to what degree do you think they need to be involved? I see Mr. Flott, you are shaking your head. Mr. Flott. I will let Mr. Ward answer the question first, because you directed it to him. Mr. Cummings. Did you want to respond to that? Mr. Ward. No. Mr. Cummings. OK, Mr. Flott. Mr. Flott. One of the issues of course, any time that you shift traffic from an existing throughput area, I-95 to say, another one, you are going to increase traffic at certain places. So if you, for example, went from New London to Charleston as a long haul ferry service, you are going to move more traffic into New London by necessity. That traffic is passing along New London today anyway. You are not increasing the amount of traffic. But you are diverting it. And that in the case of the Long Island ferry will raise some concerns among locals when all of a sudden they are not used to seeing 53 foot trailers pulled by conventional tractors pulling through their main streets and going onto the ferry, which has generally been a car ferry. I think you should anticipate some pushback from that change in the traffic flow. Now, that is why, it seems to me, you need to involve the MPOs in these larger types of planning processes. But you are not going to get short sea shipping going at any extent if you don't increase traffic in the seaports. They go together. Mr. Cummings. Mr. Barker? Mr. Barker. There has to be, the crisis isn't here yet. You can still get a truck through New York. The time is coming when you are going to have to build another bridge, which is a billion dollars, they're talking about, the TappanZee. So at some point, you are going to have something where the joint authorities, whether it is the port authority or the cities, say the trucks have to go over the ferry across New York, because it is the only way we can relieve the bridge traffic. So there will come a time when that happens. That time is not here now. Because you can still get the truck through New York. It is difficult, but it can be done. So that pressure hasn't built to a point, but it will build that way. Mr. Cummings. Mr. Margaronis, this is my final question. You talked about Title XI. I am wondering, what are the obstacles with regard to financing that you found and what, I mean, how do you go about trying to get around them? Mr. Margaronis. The obstacle right now is that the program is oriented toward people who are already in the program. There is a debt to equity ratio which makes it difficult for new entrants to come in. The program needs to be oriented more toward working capital, which would be a much better filter for the kind of loan loss problems that they are worried about. Mrs. Bentley asked me to point out that the failures in the program in recent periods have not been because they were commercially viable but because they were sponsored by Members of Congress. She said to say that, I am just telling you. [Laughter.] Mr. Margaronis. And she said that in the absence of that, the program has an excellent record. Mr. Cummings. Well, thank you very much, Congresslady. Mr. Margaronis. What I would like to say is, we cannot have short sea shipping without the Title XI program. We need serious money. We have to have a billion dollars in there, we have to be talking about $20 billion of shipbuilding. Then the economies of scale for the shipbuilders will kick in. It will make it more attractive for the shippers to come into something that provides an avenue where there is a guarantee in place. The ports could be a partner in terms of doing the guarantees to provide some of the support that some of the gentlemen have mentioned has been lacking. It would allow shipyards to get financing for upgrades, which they will need to do if you are going to start talking about the types of ships that we are talking about. Finally, what I think is critical, and it was germane to your previous question, we need to have the ports coming in here as partners, especially the smaller and shallow draft ports that actually are the areas of the most growth and where the traffic mitigation issues are most clear. If we have money for terminal upgrades and helping them to deal with their traffic programs through the Title XI program, so they don't have to go get it, we will make everybody's job a lot easier. Mr. Cummings. Mr. LaTourette. Mr. LaTourette. Thank you, Mr. Chairman. I just have a couple of follow-up questions. I assume all of you were in the room when we had the Federal panel talking about the harbor maintenance tax and the 24 hour rule and things of that nature. Mr. Ward, first to you, is it your observation or feeling that if we pass this H.R. 981 and the harbor maintenance tax is waived on Great Lakes short shipping that you would be able to compete commercially with the people going over the bridge? Mr. Ward. We would be able to compete better. There are some other issues, like the APHIS fees, the animal plant services, they have new fees coming in that they are going to charge $5.25 per truck crossing the border. If you cross on the bridge, you pay $5.25. If you cross on the barge, the truck pays $5.25 and the vessel pays $490, this is for a flat-deck barge to go across the river. I think things like that make it difficult to be competitive and I think you have to resolve the Canadian issues that I mentioned earlier to make it cost competitive. But I think we can compete if you look at the cost of truck delay being $100 plus per hour. That cost of that truck sitting in line to get across a bridge is very high. We are able to compete with that if we have the regulatory framework which would allow those trucks to use us. Mr. LaTourette. My understanding is that your company has sort of a niche market with hazmat containers? Mr. Ward. Yes, sir. Mr. LaTourette. How far do you sail? Mr. Ward. One mile. Mr. LaTourette. One mile? Mr. Ward. We are the short in short sea shipping. [Laughter.] Mr. LaTourette. Mr. Barker, let me get to you, because I had understood you to say that while the harbor maintenance tax is important, there are other economies of scale that may not make this Great Lakes proposal commercially competitive. Aside from just needing to have full ships, is there anything else that gets in the way? Mr. Barker. Well, it is just this transition is going to be very difficult in the sense that you are dealing with a whole bunch of trucking companies, all of whom are not used to either signing a long-term contract, I mean, we can finance the ferry across Lake Michigan if somebody just will sign up and say they are going to use it. But it is the whole system. I mean, as was said in testimony that a shipper calls a trucker and he gets it there as fast as he can, no fuss, no muss. You are talking about a whole systematic change. It has lots of advantages. It can relieve a lot of truck driving, which is an advantage to them. But it is a whole re-education of the system. We have a shipping system, the trucks have a trucking system. And getting them to mesh is one big job and should not be underestimated. Mr. LaTourette. Mr. Yonge, I will get to you in just a second. Where I live in Cleveland, it is a no brainer to sail 38 miles across Lake Erie as opposed to going up through Detroit or going around through New York. So to Mr. Ward's plan about not being stuck in traffic, I don't know the cost savings is to having that trucker be on the road for 16 or 18 hours, particularly given your--I bet you drove through Ohio on your way here, and that was an unpleasant experience. But it just seems to me that that makes sense. I guess it all comes down to what is the cost. I think truckers are just like everybody else, they want to know what it costs. Mr. Yonge? Mr. Yonge. I just wanted to add a little comment, we really have come a long way in short sea shipping. When we started over four years ago, started the initiative, and you have heard intermodal, intermodal. Really, short sea, once our group started talking to truckers, we call them logistics providers, third party logistics providers, the trucking companies and so on. The minute you start referring to intermodal, everybody wakes up and says, oh, that is great. Because originally they thought of us competitors. And that was a big resistance. We have done a number of financial modelings. It just matters on where the run is and how you approach it. When you say compete, can we provide a competitive rate to the logistics providers, not so much compete with the truckers but be their partners. That is a very important part of it. Mr. LaTourette. Not so long ago, the truckers and the train guys were always at each other's throats. We don't have that any more. I had the retiring president of the Union Pacific in my office last year and he said, you know, I have been in the business for almost 50 years and I never thought I would be sitting here telling somebody we are sold out, but we are sold out. And now you have a great collaboration between the truckers and the trains. Mr. Flott? Mr. Flott. I think Mr. Barker and Mark had made the point. Ultimately creating a highway is really meshing the needs of truckers for what they need with the needs of a marine operator for what he needs or she needs. That is what we have really been working on. It is a Rubik's cube. It is a matter of looking at the ship, it is looking at what the truckers want, it is kind of going back and forth between each side of this equation. But at the end of the day, if we can offer a compelling reason to use the service at a price that competes favorably with the highway, we will get the business. We build highways without having any sort of promise from users to use it. But the fact of the matter is, when we build it, they do come, and they come in droves. Because by the time we usually deliver those highways, they are already almost at capacity. Well, the advantage of the marine mode is we can get those assets in play at cost that compares favorably with our land- side infrastructure. Mr. LaTourette. Sure. I think the one difference, though, if I have a truck, I leave when I feel like leaving. If I have to wait for your ship to sail to take care of that-------- The last question of Mr. Barker and Mr. Ward, maybe on the Great Lakes, is there, as we look to the future and installing some of these routes, if they can solve the Canadian Jones Act problem and other things, is there a distinction or a mode that has a better chance of success in the roll on/roll off technology or actually loading the containers? Either one of those better for what we are talking about in the Great Lakes? Mr. Barker. Yes, I think it is very clear. Roll on/roll off really works. It keeps your costs down. Once you have to pick a container up, move it over, put it back on a chassis, you are talking, as Chairman Oberstar said, $400 or $500 or $600 or $700. If you can drive it off with your own driver, there is almost no cost. That is a significant cost. Your landing costs have to be kept to a minimum or you will never be competitive. Mr. LaTourette. And maybe Chairman Oberstar, we can talk about hours of service while the truck driver is enjoying the salt breeze rather than driving his truck, as well. Thank you, Mr. Chairman. Oh, I am sorry. Mr. Ward. On that idea of the cost, just to give an example, prior to the Iraq war there was a very large manufacturer in Detroit that came to us and bought a majority of our capacity. They bought it as a contingency in case the border became very backed up, that they could use the ferry service to get their critical freight across. So they have already paid for it. And there were severe backups, four or five hours. Those trucks waited in line, idling instead of diverting to the truck ferry, which had zero cost, because of those impediments. So I know the harbor maintenance tax is one on a list, but I think it is so high on that list and so important, this company paid for the crossing and instead waited in line four to five hours at $100 an hour because of the HMT. Mr. LaTourette. OK, thank you. Mr. Flott. And Mr. Chairman, to answer your question about the HMT, it is really the administrative difficulty of dealing with the tax, because the tax isn't paid by the trucker, it is paid by the shipper. So now all of a sudden, the shipper has to deal with a whole set of paperwork that he doesn't have to deal with if he simply uses a truck. Mr. Cummings. Right. Mr. Flott. So you put an administrative impediment into the use, it is not the tax. It is the administration of dealing with the tax. Mr. Cummings. I am glad you cleared that up. That is very significant. Mr. Margaronis, you seem like you are about to jump out of your seat. Go ahead. Briefly. Mr. Margaronis. Yes, sir. We do not agree that the ro/ro is necessarily the way to go. The reason for that is simply that a container ship is more compact, we could build it for about half the price. Also if you use modern terminal operations, you will be able to get similar, or actually you will get faster production. The other thing is that a lot of trucking companies don't want to use their drivers for long periods of time. So what they want to do is they want to drive in and drive out. You can do that with a container ship. Putting that ro/ro on takes time, it takes manning. We just haven't looked at that because we have the same container capability that we do in Europe and in Asia. If you saw the differences, I think you would find that there are some compelling reasons. Mr. Cummings. Mr. Larsen. Mr. Larsen. Thank you, Mr. Chairman. I will try to be brief in what I want to ask and give some time to folks. Mr. Barker, you talked about the crisis, that is, we are not at a crisis point. And in looking at the map that was supplied by one of you that showed Tote and Matson coming off the west coast, that screams out necessity. That is, we are not going to truck what Alaska needs from Washington State through Canada into Alaska. The infrastructure is not there to handle that. It has to go by water. Hawaii, from the west coast, for the larger bulk and obviously container, it is going to go by water. So it is a matter of necessity, which is why it tends to work, short sea shipping tends to work. In terms of crisis on I-5, putting $43 million investment with the thanks of some of the Federal dollars right now at the Pacific highway crossing to separate passenger vehicle traffic from commercial truck traffic to get more utilization out of the Pacific highway crossing as well as the Blaine crossing. So we are not yet at a crisis, we are not waiting four to five hours to cross there, even though we tell folks, between Buffalo-Niagara and Detroit-Windsor, I forget which is number one and number two in terms of crossings. But Blaine will always be number three. It will never be two and it will never be four. The Blaine crossings will always be number three. But it is important for I-5, but we are not at a crisis point. So I was real interested, Mr. Flott, in your graphs. You make the economic case. It really is, it seems to me, short sea shipping is an economic case. There is not much beyond that. After talking to all the folks I have talked to in the last two weeks and hearing from you all, it is an economic case. That is all well and good, but I want to talk about the economic case that Mr. Margaronis talked about. What service are you talking about from Olympia, Port of Olympia to Seattle and Tacoma? Mr. Margaronis. We had actually had some discussions a couple of years ago. What we would do in that case is, we would probably use an inland waterway ship which would not be a sea- going ship. That would make it cheaper. What you would do is, you would do same principle for all of the ports. Your vessel would tie up behind the ocean carrier, you would drop the boxes directly onto the short sea ship and you go straight down to Olympia. And you can do that very, very efficiently. You don't have the extra handling costs. And by the time they get those boxes out of either of those two ports, you would already be down there. So we would have speed, we would have competitive costs. Your fuel consumption is 50 percent on a per unit basis of what it is for the trucks. And you would save one ship, doing one turn a day, you could take 300 trucks off the road. So if you built a couple of them, you could take 1,000 trucks off the road for a fraction of what you are spending on doing that road widening. Mr. Larsen. Mr. Flott, do you have a comment on that? Mr. Flott. I just wanted to make two comments. Number one, I don't think there is an either/or situation here. I think we need feeder container ships, I think we need ro/ro ships. It is horses for courses in particular cases. So I didn't want to make my comment about ro/ro vessels in the lake, that only use ro/ro, don't use lift-on/lift-off. We need both. The fact is the challenge is to get not hundreds of loads of trucks off the road, but hundreds of thousands of trucks off the road. There is not going to be one tool. In some markets, where speed is not as critical perhaps, and where the traffic will bear the handling at port terminals and we can make them more efficient. We have a difficulty here in the United States, because the 40 foot international container is not our domestic standard. We use a 53-102. That is what our domestic trucking industry uses. It is what our domestic intermodal system uses. And we bring in 40 foot equivalent units and we have a lot of trans-loading, trans-shipping. And those units now, the steamship companies don't want them going inland, because they are hard to get back. They don't get used in domestic service. So these are the challenges of building domestic containerized cargo movements versus a highway trailer type movement that is more conducive to a roll-on/roll-off type configuration. They are two different trades. Mr. Larsen. Thank you. Mr. Cummings. Mr. Oberstar. Mr. Oberstar. This hearing is shaping up as the textbook definition of and guidepost for the future of interdependent transportation, or intermodal transportation. This is the best presentation, Mr. Chairman and Mr. LaTourette, that I have heard in a decade on the subject of intermodal and interdependent transportation. We are talking about short sea shipping, a relatively recent concept embraced by the Department of Transportation under Secretary Mineta's leadership. But the combined testimony of this panel is really the textbook on interdependency and intermodal goods movement. It is the best and most thoroughly documented presentation I have read, and I have read an enormous amount of material. I want to thank each of the witnesses at the table, especially my good friend, Mr. Barker, who has been onto this issue for quite some time and has been an inspiration, frankly, for it. And to that point, on page 5 of Mr. Barker's testimony in response I think to Mr. Flott's, or completing Mr. Flott's thought, he points out that in each voyage of a 1,000 foot vessel in the Interlake fleet, you carry the equivalent of 7,100 car unit trains or 2,800 25 ton trucks. That is taking a lot of traffic off the highways and off the railways and a lot of abuse. Now, in our Committee, we have the collective responsibility for all these modes of transportation. And as I have watched over the last two decades, in fact, in 1987, I, as Chair of the Investigations and Oversight Subcommittee, held hearings on the future of transportation in the post-interstate Europe. We had witnesses then who forecast the coming collision of movement of goods and people on the Nation's highways and the extraordinary growth of transportation in excess of population growth. If you look at the 20 year period, population has grown about 4 percent a year. But transportation has grown on an average of 14 percent, well over three times population growth. Futurists usually fall way beyond actual performance of their projected model. In transportation, futurists fall well short of actual demand. That is our challenge, is to think beyond the model, beyond current practice and not be limited by it. In today's economy, there are a 1,400,000 rail cars moving by just our five major railroads. They need to replace 50,000 of those a year and add another 50,000. There are only three rail car manufacturers in the United States, they can't keep up with the demands. They need to replace locomotives, build new ones. Because they haven't invested over the last decade and a half, now they are making substantial profits, $4.5 billion net profit for the five major railroads last year. Now they have the money to invest in capital equipment and rail bed. But they are way short, way short of where they need to be. There are 7 million trucks, inter-city commercial truck vehicles. They cannot carry all the demand placed on them by our economy. They are asking the railroads to carry their trailers. The railroads are asking the trucking sector to carry more of the container traffic, because they can't handle it all. That is not a formula for, it is gridlock. Maritime now can make its contribution. On the inland waterways, however, a round trip voyage by a barge tow from Clinton, Iowa to the world's most important grain export facility, New Orleans, is 820 hours round trip. Why? Because those 1,200 foot barge tows have to be broken up at each lock, except for Alton, Illinois, into two smaller tows sent through separately, lashed together onto the next one. If we expanded the locks on the Mississippi River to 1,200 feet, the five principal locks and the two on the Ohio and Illinois River system, then we can take up to 60 hours off that transit time. That means that our grain will move at lower cost into the international markets. If you look at Brazil, which is vigorously developing soybean sector in their agriculture, the point of export in Brazil, Sao Paulo, is 1,200 miles further out into the Atlantic Ocean than New Orleans. More than 800 miles further out into the Atlantic Ocean than any east coast port of the United States. That means they have a four day sailing advantage or so over exports from New Orleans. Grain moves on as little as an eighth of a cent per bush in international markets. So if together we move to, as Mr. Barker said in his testimony, remove the obstacles that Government has placed in our way, we have failed to invest in our infrastructure, we have failed to upgrade our inland water system, we have failed, the Corps of Engineers over the last ten years has failed to dredge the interconnecting channels on the Great Lakes and the harbors on the Great Lakes, because we had high water and they didn't need to do the dredging and now we have low water. And our ships, our vessels are going out 6,400 tons lighter than they would if the channels were dredged to the appropriate depth. That means higher cost to produce steel in Mr. LaTourette's State. It means higher cost for goods shipped in the heartland of the United States. Why is all of this important? Because in the Great Lakes States we have 35 million people, we produce 40 percent of the Nation's agriculture, one-third of the Nation's industrial goods and 40 percent of the Nation's export commodities, but we move less than 1 percent of the containers. We can do better than that on the Great Lakes if we take the ideas that each of you has set forth and harness them into an initiative. Mr. Cummings is going to take the initiative on the harbor maintenance tax. We will develop the necessary legislative language, we will determine what the offsets are in this pay as you go,budget process that we Democrats have imposed on us and the Congress. It may be a great budget idea, I liked the old days when we just added to the deficit. [Laughter.] Mr. Oberstar. All right, we will pat ourselves on the back and be responsible, find the offset and then we will move that legislation. And we need to do it. We need to address the matter of, again, Mr. Barker cited the shoreside infrastructure. That is one thing I would like each of the witnesses to comment on, is what do we need, what do ports need in shoreside infrastructure to accommodate short sea shipping. Mr. Barker, since you raised it, I will ask you first. Mr. Barker. The big issue we see, and it is not huge in terms of the operations that we are thinking of, is basically the bulkhead dock so you can accommodate roll-on/roll-off ships when they're not around in every port. It is not big money but it is important money. Mr. Oberstar. And that is the role of the public sector. Mr. Barker. Yes. Mr. Oberstar. There is a partnership here of the public sector and the private sector. The public sector does its job of being efficient and providing the infrastructure, the private sector will thrive. Do others have comments on that? Mr. Margaronis. We are going to need new container crane capability at the satellite ports. And we are going to need to look at some new designs for those terminals, because the existing terminal operations are 50 years old. And we are not using our space intelligently. One of the issues that we have not talked about much is the high impact of emissions at some of the major ports and the need to mitigate those with something that is more streamlined. Those ports are going to need new cranes. They are going to need better designs to move the boxes in and out, whether they are on a ro/ro basis or on a container basis. Those designs are available, but the ports don't have the money for that. They are going to need help from somebody to get that. Mr. Flott. The ports we are looking at, Mr. Chairman, I would agree with Mr. Barker, it is a roll-on/roll-off, you need a parking lot by the sea, essentially. In our case, the scheduling is very important, because you are looking at a synchronized and quite highly timed operation to meet a schedule. So we would be working with ports to create private facilities, so that you actually have a private terminal and you can do the turnaround in those private terminals. But they are not big capital investments, generally. Mr. Oberstar. Mr. Yonge? Mr. Yonge. Mr. Chairman, in the studies that we have done, there are some secondary ports that are just waiting there for some capacity and some use. But keep in mind if you will that in some of the points a number of us have made here is that domestic cargo is really where the volumes are that is going to be a challenge to our transportation capability. All we need is a truck terminal. We don't need customs, we don't need immigration, we don't need anything complicated. We just need, if you can imagine what a truck terminal is or a rail intermodal depot is, rather simple operations. That is all that is needed. It is not a lot of cost and there are places along the U.S. east coast, Gulf, west cost, that can be used. Mr. Oberstar. Mr. Ward? Mr. Ward. Chairman Oberstar, we use a brownfields site, and it is nothing more than a parking lot and we have customs on both sides. I think that is a model that can be followed. Another benefit is the security within the Great Lakes, because a new service would most likely become a border crossing, is you can have a higher level of security on short sea shipping that you cannot have at the fixed crossing. So I think that is an additional benefit. Mr. Oberstar. I have looked at several of the major intermodal containers moving from portside to rail and truck and truck to rail, and they are just beehives of activity. They can't handle all of the pressure. The new size container vessels that I described a moment ago are going to unload more containers on our shores. We need to find, of course, in our high-tech economy, we have to find something to put into those empty boxes to ship back to the Pacific Rim. We are not doing a very good job of that, except for scrap iron and shredded paper. [Laughter.] Mr. Oberstar. But that is a matter for the private sector to figure out. We will do our part, and with your contribution, we will address these issues and list the energy of short sea shipping. I noticed, Mr. Margaronis, your recommendation of an infusion of capital into the Title XI guaranty program. Mr. Margaronis. Yes, sir. Mr. Oberstar. Elaborate on what you think might be a capitalization need. Mr. Margaronis. I think for what we are talking about, we should be talking about a billion dollars. I think we should be looking at a $20 billion shipbuilding program. The benefits that, we are talking about building, whether you go with a container ship or you go with a ro/ro ship, we are talking about ramping up to a production capacity we currently do not have. And we are not going to be able to do that without the financing mechanism. I think the good thing about the Title XI program is you are not going to need a taxpayer subsidy to operate these services. Most of them can be done privately and commercially. But the loan guarantee is a critical link here. And the banks and the financial institutions are going to be much more oriented toward getting involved if Title XI is back on track. Mr. Oberstar. Mr. Flott? Mr. Flott. Could I also suggest, I agree with Mr. Margaronis in one respect, but I also think the RRIF program, which under SAFETEA-LU was dramatically increased, is another model that should be looked at in combination with Title XI. I think we have already examples of financing systems, both Title XI and RRIF, that have proved their value. And the issue would be to see how perhaps an updating or a combination in creating an RRIF or Title XI type program for waterside might be in order. I would also want to point out one other thing, and I think, Mr. Chairman, you are right to point it out, and that is that we have this enormous system of inland waterways which had been starved of investment for many, many years. But the cargo that is choking our highways has never really moved in that system. It moves today from distribution centers to retail establishments and between assembly points and further assembly points. That is the highway traffic. That is really the dominant driver of our congestion, and we need to really look at these two issues in combination in parallel rather than as either-ors. Mr. Oberstar. Yes, you are quite right about that, I agree. Today's economy needs the creativity and the energy and the contribution of all of the modes of transportation. Now, the Administration has done everything they could to choke the RRIF loan program. We increased it from $3.5 billion to $35 billion in a bipartisan initiative in SAFETEA-LU. The Administration's fiscal 2008 budget submitted just a week ago zeroes out the RRIF loan. Well, we are not going to stand for that. I have already made a pitch to the Budget Committee and the Appropriations Committee to restore the funds. The Title XI guaranty over the years I served on the Merchant Marine and Fisheries Committee, before it was dissolved and absorbed into, largely absorbed into the Public Works and Transportation-- well, within Public Works and Transportation, now T&I, we have made over $11 billion in loan guarantees over the years and about $8 billion or $10 billion in construction differential subsidies and operating differential subsidies, and those largely went to the saltwater port operations. Mr. Barker, I think on the Great Lakes there may be two or three of the 1,000 foot ore carriers that benefitted from Title XI guarantees? Mr. Barker. Yes, there were at least three. Mr. Oberstar. So we have not had our fair share on the Great Lakes of the Title XI guaranty. And we can do that authorization in this Committee and in this Subcommittee. And we will do that. We will move that ahead. We have to take leadership and responsibility and ownership of these issues, and this Committee is going to do that. Mr. Margaronis. That would be enormously helpful, Congressman. Enormously helpful. Mr. Oberstar. I am sure Mr. LaTourette will be in full partnership and agreement. The Lorraine Shipyards will be happy to see some of that money flow. [Laughter.] Mr. Margaronis. So would we. Mr. Oberstar. I yield back. I thank our witnesses for their patience, their contribution. I am sorry I couldn't be here for your individual testimony. I had other problems, the cities and the highways and others to deal with. Mr. Cummings. I want to thank all of you for being here. Your testimony has been extremely helpful and as I said at the beginning of the hearing, one of the things that Mr. Oberstar has emphasized is that we don't need to be having hearings just to be having hearings. We are trying to get things done and solve the problems of the American people. This is a major one. It just has, no pun intended, a rippling effect. So you have heard the Chairman, and we are going to work to make as much happen as we possibly can in the time that we have. We just don't want to be in the situation, as I said before, where 10 years from now we are grappling with the same problems, or another group of Congresspeople are grappling with the problems. We really appreciate all of you. We appreciate you for driving again, so far, and hope that you all have a better trip back. Your father looks like he is in better shape than you. [Laughter.] Mr. Cummings. Maybe this driving is good for him. Thanks a lot, and this hearing is called to an end. 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